Renewable Energy Opportunities for Islands Tourism

Home , Solar air conditioning, Sunetric, SunPower

IRENA International Renewable Energy Agency

RENEWABLE ENERGY OPPORTUNITIES FOR ISLAND TOURISM

About IRENA

The International Renewable Energy Agency (IRENA) is an intergovernmental organisation that supports countries in their transition to a sustainable energy future, and serves as the principal platform for international co-operation, a centre of excellence, and a repository of policy, technology, resource and financial knowledge on renewable energy. IRENA promotes the widespread adoption and sustainable use of all forms of renewable energy, including bioenergy geothermal, hydropower, ocean, solar and wind energy, in the pursuit of sustainable development, energy access, energy security and low-carbon economic growth and prosperity. www.irena.org

Acknowledgements

This report has been made possible by a Voluntary Contribution from the Government of the Federal Republic of Germany. This report was produced in collaboration with Andrea Bassi, KnowlEdge Srl, contracted as a consultant by IRENA. The report has benefitted from inputs from the participants in the IRENA event on renewable energy for island tourism, which took place in Cyprus on 29 and 30 May 2014, hosted in co-operation with the Government of the Republic of Cyprus. Peer reviewers provided invaluable feedback to enhance and enrich this report. In particular, many thanks go to Mario Gamberale (AzzeroCO2 and Exalto), United Nations World Tourism Organisation (UNWTO), Adriana Maria Valencia Jaramillo (Inter-American Development Bank - IDB), Cipriano Marin (Renewable Energy Futures for UNESCO Sites - RENFORUS/UNESCO), Les Nelson (International Association of Plumbing and Mechanical Officials - IAPMO), Giuseppe Sauli (Nidec ASI S.p.A.), Brett Shapiro (editorial consultant) and Riccardo Toxiri (Gestore dei Servizi Energetici S.p.A). The report also benefitted from internal review with inputs from Jeffrey Skeer and overall guidance from Dolf Gielen.

Authors: Emanuele Taibi and Peter Journeay-Kaler (IRENA) Andrea Bassi (KnowlEdge srl)

For further information or to provide feedback, please contact: Emanuele Taibi, IRENA Innovation and Technology Centre E-mail: [email protected] or [email protected]..

Disclaimer

While this publication promotes the adoption and use of renewable energy, the International Renewable Energy Agency does not endorse any particular project, product or service provider. Renewable Energy Opportunities for Island Tourism

International Renewable Energy Agency ii Renewable Energy Opportunities for Island Tourism CONTENTS

LIST OF FIGURES ��V LIST OF TABLES ��VI LIST OF BOXES ��VI

EXECUTIVE SUMMARY ��1

1 INTRODUCTION ��3 1.1 Ener gy trends in the tourism sector and in Small Island Developing States �� 4 1.2 An opportunity for the tourism sector to increase profitability and reduce socio-economic vulnerability �� 9

2 TE CHNOLOGY ASSESSMENT: INVESTMENTS, AVOIDED COSTS AND ADDED BENEFITS ��11 2.1 Solar water heating systems ��14 2.2 Solar Air Conditioning systems �� 17 2.3 Sea Water Air Conditioning systems ��20 2.4 Solar Photovoltaic systems ��23

3 B ARRIERS, ENABLING CONDITIONS AND BEST PRACTICES ��31 3.1 B arriers to technology deployment ��32 3.2 Enabling policies ��33 3.3 Review of best practices ��38

4 MODELING THE OUTCOMES OF RET ADOPTION IN ISLAND TOURISM ��43 4.1 Model specifications ��43 4.2 Main results ��45

5 RELEVANT CASE STUDIES ��47 5.1 Turtle Beach Resort, Barbados ��47 5.2 In tercontinental Bora Bora Resort & Thalasso Spa ��48 5.3 Turtle Island Resort, Fiji ��49 5.4 Rethymno Village Hotel, Crete ��50

6 CONCLUSIONS ��51

Renewable Energy Opportunities for Island Tourism iii ANNEX I: TECHNOLOGY DETAILS ��53 Solar water heating (SWH) systems ��53 Solar air conditioning (SAC) systems ��55 Sea water air conditioning (SWAC) systems ��55 Solar photovoltaic (PV) systems ��56

ANNEX II: REVIEW OF RENEWABLE ENERGY POLICIES IN SIDS ��59

REFERENCES ��61

iv Renewable Energy Opportunities for Island Tourism List of Figures

Figure 1. Inbound tourism by mode of transport. Global average (left), SIDS (right) ...... 5 Figure 2. Breakdown of energy use for an average hotel...... 5 Figure 3. Breakdown of electricity consumption in the hotel sector of Barbados, by hotel size...... 6 Figure 4. International tourism receipts in SIDS (% of total export and GDP)...... 7 Figure 5. Tourist arrivals in SIDS, total and as share of world tourist arrivals...... 7 Figure 6. Average renewable energy consumption in SIDS, including hydro (% of TFEC)...... 8 Figure 7. Typical Levelized Cost of Electricity ranges with weighted average for 2013. Graphs assume a 10% cost of capital...... 10 Figure 8. Range of LCOE estimations for PV, SWH, SAC and SWAC, under different CAPEX assumptions, compared to the business-as-usual solutions...... 13 Figure 9. Range of LCOE estimations for PV, SWH, SAC and SWAC, under different Weighted Average Cost of Capital (WACC) assumptions, compared to the business-as-usual solutions...... 13 Figure 10. Schematic representation of a solar water heater. Source: Australian Government...... 14 Figure 11. Range of LCOE estimations for SWH, under different Weighted Average Cost of Capital (WACC) assumptions, and compared to the cost of electric water heaters based on island electricity prices...... 15 Figure 12. Schematic representation of a SAC system with parabolic trough...... 18 Figure 13. Range of LCOE estimations for SAC, under different Weighted Average Cost of Capital (WACC) assumptions, and compared to the cost of electric chillers, based on island electricity prices and COP of 2.8...... 20 Figure 14. Schematic representation of the sea water air conditioning (SWAC) system installed at The Brando resort, French Polynesia...... 21 Figure 15. Range of LCOE estimations for SWAC, under different Weighted Average Cost of Capital (WACC) assumptions, and compared to the cost of electric chillers, based on island electricity prices and COP of 2.8...... 22 Figure 16. Main components of grid-connected solar PV systems...... 24 Figure 17. Main components of an off-grid solar PV systems...... 24 Figure 18. Range of LCOE estimations for solar PV, under different Weighted Average Cost of Capital (WACC) assumptions, and compared to the electricity price range i n islands (diesel generators)...... 26 Figure 19: Causal Loop Diagram (CLD) representing the main feedback loops and indicators included in the model...... 44 Figure20: Avoided energy bill minus investment annual (million USD/year) and cumulative (million USD)...... 45 Figure A1. Schematic active SWH, showing pumps and controllers to transfer heat from collector to storage: (a) direct system (no heat exchangers); (b) indirect system with two heat exchangers...... 54 Figure A2. Schematic passive system, with no pumps/controllers to circulate heat. Top: integral collector storage system. Bottom: thermosiphon system...... 54

Renewable Energy Opportunities for Island Tourism v List of Tables

Table 1. Summary table of key assumptions used for LCOE calculation of SWH systems ��16 Table 2. Summary table of key assumptions used for LCOE calculation of SAC systems, and results ��19 Table 3. Summary table of key assumptions used for LCOE calculation of SWAC systems, and results ��23 Table 4. Summary table of key assumptions used for LCOE calculation of solar PV rooftop systems, and results ��26 Table 5. Indicators and costs of renewable energy investments in small island tourism facilities, by technology type �� 27 Table 6. Avoided costs resulting from renewable energy investments in tourism facilities, by actor type. ��29 Table 7. Indicators of added benefits resulting from renewable energy investments in tourism facilities, by actor type. ��30 Table 8. Renewable energy deployment in island tourism: main barriers, intervention options and relevant case studies by island context, hotel ownership and technology option ��42

List of Boxes

Text Box 1 – Required investment and the Levelized Cost of Electricity of renewable energy technologies...... 12 Text Box 2 – The solar water heater industry in Barbados...... 15 Text Box 3 – Ice: a cost-effective thermal energy storage solution...... 17 Text Box 4 – Solar air conditioning in Aegean islands hotels...... 17 Text Box 5 – Installation and operation of SWAC systems in island hotels...... 22 Text Box 6 – Solar PV installations in island hotels...... 25 Text Box 7 – Avoided costs and added benefits from RET uptake and use...... 28 Text Box 8 – International cooperation on renewable energy in SIDS...... 33

vi Renewable Energy Opportunities for Island Tourism EXECUTIVE SUMMARY

Tourism represents an important economic driver for generated electricity, either purchased from the island economies, and is at the same time highly de- local power grid, or self-produced with private pendent on a reliable, affordable and environmentally diesel generators. friendly energy supply. Energy supply in islands is still dominated by fossil fuels, in particular oil products. As Island hotels are increasingly investing in RETs, which a consequence, this makes the tourism sector – and the are now cost-competitive in most island contexts (IRE- whole economy – of islands vulnerable to the volatility NA, 2013a; IRENA, 2012a). The four technologies ana- of oil prices, and to the impacts deriving from the use of lyzed in this report have been compared to the typical fossil fuels in a fragile environment. alternative found in most island hotels, and proved to be cost-effective, with attractive payback periods. The case In island tourism facilities, energy services such as air studies show a range of less than one year for SWH, and conditioning, lighting, cooking and water heating are up to 11 years for small-scale SWAC systems. often provided by fossil fuels, primarily from electricity produced by diesel generators. The high price of In addition to the economic benefits directly derived diesel fuel used for power generation results in com- from reduced energy costs, case studies indicate that mercial electricity tariffs that are much higher than the the transition to renewable energy will bring additional global average. In 2012 the average electricity price was gains by attracting eco-friendly travelers who are willing USD 0.33/kWh in Caribbean islands and Mauritius, and to pay a premium for sustainable tourism experiences. USD 0.43/kWh in Hawaii. In 2010 the electricity price The well-being of island communities will also be im- in Pacific Island Countries ranged between USD .0 17 proved through the reduction of air and water pollution and 0.51/kWh .This is in comparison to an average price from fossil fuel combustion and spillages, as well as of about USD 0.26/kWh in EU member states, and through the creation of additional employment oppor- USD 0.09/kWh in China and Canada (European Com- tunities for the installation, operation and maintenance mission, 2014). Since the electricity bill is an important of RETs. cost item for island hotels, the island tourism sector faces difficulties in offering competitive prices compared However, the pace and scale of investment in RETs in with the majority of non-island destinations, which have island tourism is currently well below its potential. much lower energy costs. Three key barriers that limit RET deployment in the This report analyzes in detail the potential contribution tourism sector of islands are: to the island tourism sector of four renewable energy (1) Competitiveness of RE options (technical and technologies (RETs): economic barriers) (2) Access to capital and cost of financing (owner- ●● Solar water heating (SWH) systems use solar ship and financial barriers) heat to warm up domestic water, usually replac- (3) Institutional and technical capability (knowledge ing electric water heaters. gaps) ●● Solar air conditioning (SAC) systems use solar Enabling policies are discussed to provide solutions to heat to provide cooling and heating, usually re- remove these barriers and accelerate the deployment of placing traditional electric chillers. RETs in island tourism. These include capital investment, ●● Sea water air conditioning (SWAC) systems use incentives and disincentives, public targets mandated cold water from the ocean depths to provide air by law, and institutional and technical capacity building. conditioning in hotel rooms and facilities, usually Best practices and case studies that illustrate successful replacing traditional electric chillers. deployment of each of these four RETs in island tourism ●● Solar photovoltaic (PV) systems produce elec- facilities are also presented, to show their benefits and tricity from the sun, usually replacing diesel- provide concrete examples for replication.

Renewable Energy Opportunities for Island Tourism 1 2 Renewable Energy Opportunities for Island Tourism 1 INTRODUCTION

With the exception of a few countries, small island results in a drop in tourism demand and a consequent states rely heavily on fossil fuels for their energy sup- loss of revenue. Thus, increasing fossil fuel prices have a ply. While diesel generators provide flexibility for power direct impact on island tourism competitiveness. generation, diesel prices are high, especially in Small Island Developing States (SIDS), as a result of the dis- RETs can generate significant savings for tourism opera- tance from major oil refining and distribution hubs, high tors by offsetting or replacing the use of diesel-based fuel prices and import costs, lack of modern port and electricity. In contrast to volatile diesel-based electricity fuel storage facilities, and the use of outdated technolo- prices, RETs provide stable operating costs to assist ho- gies in some countries. tels and resorts with long-term business planning. RETs also contribute to improving the state of the environ- Tourism represents an important economic driver for ment and support efforts to position islands as sustain- a small island economy, and is at the same time highly able tourism destinations. All of these factors increase dependent on reliable, affordable and environmentally the competitiveness of the island tourism sector. This friendly energy supply. This makes SIDS’ tourism, and study assesses the potential contributions that four SIDS’ economies as a consequence, vulnerable to fossil commercially available RETs can provide to the island fuel availability and energy price shocks. tourism sector.

In addition, although of less concern in the short term, (1) Solar water heating (SWH) environmental sustainability plays an important role in (2) Solar air conditioning (SAC) tourism. The less the environmental impact of a tour- (3) Sea water air conditioning (SWAC) ism activity, the longer that service can be available to (4) Solar photovoltaic (PV) systems. future tourists and also create revenue. Furthermore, as tourists are becoming more aware about their environ- These four RETs are evaluated considering their contri- mental footprint, the demand for sustainable tourism is bution to energy generation (for cooling, water heat- growing. ing and lighting), the investment required, as well the cost savings and benefits they create. Considering that This report assesses the business case for the deploy- the cost of fossil fuel imports in most islands results ment of Renewable Energy Technologies (RETs) in in commercial electricity tariffs that are higher than island tourism. A systemic approach is adopted for the global average (in the range of USD 0.33/kWh to the analysis of the challenges and opportunities in the USD 0.44/kWh in islands, against USD 0.26/kWh in energy and tourism sectors, with consideration of the European Union member states), these technologies potential synergies that renewable energy deployment can be economically attractive, generating considerable strategies can create with other sectors key to the cost savings. SWH systems offset or replace the cost of socio-economic development of islands. electric water heaters, SAC and SWAC systems lower or eliminate diesel-based heating and cooling services, and High energy prices have several direct and indirect im- PV systems reduce or eliminate the cost of electricity pacts on the profitability of the tourism sector, which from national utilities or onsite diesel generation. In ad- also affect the social and economic development of dition, RETs provide stable power generation costs that islands and SIDS. Tourism operators make use of elec- increase resilience and reduce vulnerability of island tricity for cooling, water heating, lighting and other key economies, and create a more conducive investment services provided in hotels and resorts. Energy is also environment. As an added value to tourism operators, used for transportation and for food preparation. To RETs improve branding by showcasing (sustainable) compensate for increasing energy costs, tourism com- facilities and activities, and by reducing environmen- panies operating in islands are forced to raise the price tal degradation (e.g., air and water pollution), both of of accommodation and transport services. This often which respond to the growing demand for ecotourism.

Renewable Energy Opportunities for Island Tourism 3 Despite the advantages of RETs, their deployment in ly to reach 1.8 billion by 2030 (UNWTO, 2012).1 Accord- island tourism faces several barriers: ing to the World Travel & Tourism Council, the tourism sector contributes to one in every eleven jobs worldwide ●● Competitiveness of RE options (technical and (WTTC, 2012). Tourism represents a key driver of global economic barriers) economic growth, and is a crucial component of the ef- ●● Access to capital and cost of financing (owner- fort to alleviate poverty and achieve the other develop- ship and financial barriers) ment objectives in many developing countries. ●● Institutional and technical capability (knowledge gaps). On the other hand, the approach adopted for tourism development largely influences the sustainability of Four main policy tools are available to create the re- the sector; intensive use of resources, high amounts quired enabling conditions to overcome the barriers of waste generation, growing negative impacts on lo- mentioned above: cal terrestrial and marine ecosystems, and mounting threats to local cultures and traditions represent the (1) Capital investment main challenges faced by tourism worldwide (UNEP, (2) Incentives (such as tax reductions) 2011). In particular, the intensive use of energy in tourism (3) Public targets mandated by law is a serious concern for the long-term economic, social (4) Institutional and technical capacity building. and environmental sustainability of the sector, as many tourism-based economies rely heavily on fossil fuels for This report discusses these policy tools and best prac- energy supply, resulting in the tourism sector’s contri- tices in detail, including new leasing models for RETs, bution of about 5% of global greenhouse gas (GHG) such as the 2013 partnership between Starwood Hotels emissions (75% of which is due to travel and 21% to & Resorts Worldwide and NRG Energy, and the net accommodation, air conditioning and heating systems) metering policies and variable-accelerated depreciation (UNEP, 2011). In particular, it is estimated that the hotel implemented by the Virgin Islands Water and Power sector’s contribution to global warming includes annual

Authority (WAPA) in the Virgin Islands, and by Grenada emissions of between 160 and 200 kg of CO2 per square Solar Power Ltd (GRENSOL) in the Eastern Caribbean. metre of room floor area (Hotel Energy Solutions, 2011).

This report also details input received from island tour- Most of the energy consumption in the tourism sector ism stakeholders and includes relevant case studies for is attributable to transport and accommodation, which deployment of RETs. account for 75% and 21% of sectoral GHG emissions, respectively (UNEP, 2011). Using renewable energy, efficient technologies and sustainable practices in avia- 1 .1 Energy trends in the tourism tion, road transport and accommodation design and sector and in Small Island operations are key in order to mitigate climate change impacts in tourism. For example, one tourist travelling Developing States on a one-week holiday from Amsterdam to Aruba would require energy consumption of between 21 and 30 Giga- 1.1.1 Global energy trends in the tourism joules (GJ), of which 20 GJ would correspond to flight sector energy use (potentially declining to 4 GJ with the use of biofuels), while hotel energy use would fall in a range Considering direct and indirect impacts, tourism ac- between 1 and 10 GJ, depending on hotel size and cate- counts for approximately 9% of global gross domestic gory. As stated by UNEP’s Green Economy Report, high product (GDP) – tourism is a major contributor to GDP energy consumption for tourism transport and accom- in SIDS, reaching 45.5% in Aruba and 47.4% in Maldives modation is mainly due to the growth in international (Hampton & Jeyacheya, 2013). In many developing and domestic travel, combined with the increasing use countries, tourism is a key source of local employment of energy-intensive transport modes. In particular, over opportunities and contributes to poverty eradication. At

the global level, it is estimated that international tourist 1 http://media.unwto.org/en/press-release/2012-01-16/ arrivals surpassed the 1 billion mark in 2012, and are like- international-tourism-reach-one-billion-2012

4 Renewable Energy Opportunities for Island Tourism Figure 1. Inbound tourism by mode of transport. Global average (left), SIDS (right)

Water Road 41% 40%

Air Air 52% 59%

Rail 2%

Water 6%

Source: (UNWTO, 2013)

Figure 2. Breakdown of energy use for an average hotel.

General Other, 3.9% equipment, 5.4% Hot water & laundry, 5.5% Pool pumps, 7.4%

Guestroom Air equipment, conditioning, 7.4% 48.2%

Kitchen & refrigeration equipment, 10.6% Lighting, 11.5%

Source: (CHENACT, 2012)

half of all travelers prefer to arrive at their destination by water and rail transport decreased from 11% to 8% over air, or choose destinations most easily reached by plane the same period (UNWTO, 2008; UNWTO, 2013). (Figure 1). In fact, the global share of tourism traveling by air grew from 42% to 52% between 2007 and 2012, The use of energy in hotels and resorts, e.g., for heating and the share is naturally higher in the case of island and cooling, lighting, cooking, cleaning, ranges between tourism.2 On the other hand, road travel for tourism 25 and 284 MJ per guest per night (UNEP, 2011). Overall, purposes experienced a slight decline between 2007 the weighted global average of energy consumption and 2012, going from 42% to 40% of total travel, while for international tourism activities is estimated at 135 MJ per guest per night (UNEP & UNWTO, 2012). The drivers of energy use in the accommodation sub-sector 2 For example, tourist arrivals by air in 2012 accounted for 97% of total arrivals in Fiji, 96% in Grenada and 98% in Mauritius (UNWTO, vary considerably depending on the geographical area 2014). and the size of the hotel. In the Caribbean, for example,

Renewable Energy Opportunities for Island Tourism 5 Figure 3. Breakdown of electricity consumption in the hotel sector of Barbados, by hotel size.

Breakdown of electricity consumption in the hotel sector

100% Miscellaneous 7% 2% 3% 11% 9% 6% 21% 14% O ce Areas Equipment 9% 13% 2% 11% 80% 4% Hot Water 11% 10% 10% 19% 4% 60% 31% Pumps 8% 12% 15% 4% Kitchen 14% 8% 40% Laundry 9% 2% Guest Rooms Equip. & Lighting 9% 20% 39% 50% 50% 54% Lighting 19% 0% Air Conditioning Very Small Medium Large Very small large Size of Hotel

Source: (CHENACT, 2012)

the main driver of energy consumption in hotels is 1 .1.2 Energy and tourism trends in SIDS air conditioning (48%), followed by lighting (11.5%), refrigeration (10.6%), guestroom equipment (7.4%) and In the last decades, islands have gradually adopted pool pumps (7.4%), as shown in Figure 2 (CHENACT, tourist activity as one of their development mainstays. 2012). In the case of Barbados, air conditioning is the Nowadays, if we take into account the total number of main driver of electricity consumption, being responsible tourists, islands represent the second largest ensemble for about 50% of total energy use in medium to large of tourist destinations in the world, after the block made hotels, and 39% in small hotels. Water heating is instead up by big cities and historical towns. the main driver of energy consumption in very small hotels (Figure 3). Globally, hotels and resorts use up Tourism is a key sector for most SIDS. As an example, to 50% of their energy consumption for heating and international tourism receipts contributed to 51% of the cooling, followed by water heating and cooking (Beccali, total value of exports of SIDS in 2007 (Figure 4), com- La Gennusa, Lo Coco, & Rizzo, 2009). This is also pared to 10% in other developing countries (UNDESA, due to low energy efficiency and high energy waste, 2010). which account for a large share of final consumption, thereby leaving room for considerable improvements Tourist arrivals in SIDS have increased by almost 32% and savings (UNEP & UNWTO, 2012). According to over the last decade, going from 22.9 million in 2000 to the World Economic Forum, improvements in energy 30.19 million in 2010. However, the performance of the efficiency and reductions in carbon emissions in the tourism sector in SIDS lagged behind the global trend, accommodation sub-sector are primarily targeting the which grew by 39.3% over the same period (Figure 5) use of existing technologies and practices, such as (UNWTO, 2012). insulation, efficient lighting and appliances, change in room temperatures and increased awareness by Figure 6 shows that the average share of renewable consumers, but also include renewable energy use energy (including hydro) in total final energy consump- (WEF, 2009). tion of SIDS has declined between 2000 and 2009,

6 Renewable Energy Opportunities for Island Tourism Figure 4. International tourism receipts in SIDS (% of total export and GDP).

International tourism receipts as percentage of total exports and GDP (2007)

100 90 Share of Exports Share of GDP 80 70 60 50 40 30 20 10 0 SamoaMaldivesSt. LuciaVanuatuCape VerdeBahamasGrenadaBarbadosAntiguaSt. and Kitts BarbudaSt. and Vincent NevisDominica andFiji the GrenadinesSeychellesJamaicaTongaMauritiusBelize DominicanSao TomeRepublicHaiti andGuyana PrincipeSurinameTrinidadSingapore and Tobago

Source: (UNDESA, 2010)

Figure 5. Tourist arrivals in SIDS, total and as share of world tourist arrivals.

35 4.0%

30 3.5% 3.0% 25 2.5% 20 2.0% 15 1.5% 10 1.0%

5 0.5%

0 0.0% 2000 2005 2006 2007 2008 2009 2010

Tourist arrivals (million) Arrivals in SIDS as % of world

Adapted from: (UNWTO, 2012)

Renewable Energy Opportunities for Island Tourism 7 Figure 6. Average renewable energy consumption in SIDS, including hydro (% of TFEC).

18%

17%

16%

15%

14%

13%

12%

11%

10% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Renewable energy consumption (% in TFEC)

Data from World Bank SE4ALL

going from about 17.6% to 14.6%. This indicates that Given the economic, social and environmental impacts energy needs of SIDS increased at a faster pace than of fossil fuel imports, governments of SIDS have ex- their deployment of RETs. As a result of the continued pressed interest in shifting towards a low-carbon econ- reliance of SIDS on the use of imported fossil fuels, their omy by increasing investments in renewable energy economies, including the tourism sector, are particularly and energy efficiency, as well as by establishing sound vulnerable to energy price variability. In particular, with regulatory and policy frameworks for sustainable tour- the rise of oil prices over the last few years, fuel import ism. Examples of the adoption of RETs do exist. In the bills currently represent approximately 20% of annual Caribbean, examples include: a 20 MW PV system an- imports for 34 of the 38 SIDS countries,3 and between 5 nounced by the Dominican Republic; investments in and 20% of their GDP.4 the construction of several wind farms in Aruba and a 20 MW wind capacity investment announced by Haiti; Pacific islands, for example, are reliant on fossil fuel 160 MW of geothermal capacity addition planned in imports for 95% of commercial energy use. High im- Saint Kitts and Nevis; and the advanced development port costs result in very high electricity tariffs, which of SWH systems in Barbados (Shirley & Kammen, 2013; averaged USD 0.44/kWh for commercial users in 2010 IRENA, 2012a; IRENA, 2012b). In the Pacific, Fiji is using (IRENA, 2013a). UNDESA estimated that an increase hydropower extensively (over 200 MW of capacity) of USD 10 in average crude oil price produces a 1.5% and promoting the installation of PV systems (more decrease in GDP in Pacific SIDS (UNDESA, 2010). As than 3,000 SHS installed in 2012); Palau has 540 KWp a result, seven Pacific island states are ranked by the of grid-connected solar PV systems; and the Federated Asian Development Bank among the ten economies States of Micronesia have planned the conversion of most vulnerable to oil price volatility in the Asia-Pacific outer island diesel generators to mini-grid solar systems region (ADB, 2009). by 2014 (IRENA, 2013a). In the Indian Ocean, solar PV micro-power stations are being installed in villages in Comoros, while Mauritius is increasingly investing in 3 38 SIDS are UN member countries, while another 19 are Non-UN Members or Associate Members of the Regional Commissions the use of commercial biomass, to the point that 15% 4 http://sidsenergy.wordpress.com/tag/wave/ of its energy requirements are being met from bagasse

8 Renewable Energy Opportunities for Island Tourism derived from the production of sugarcane (UNDESA, renewable energy is considered to be part of the tourist 2010). At the Rio+20 Conference in June 2012, Heads attraction.6 of State formally adopted the 10-Year Framework Pro- gramme on Sustainable Consumption and Production RETs could address existing challenges and turn them (10YFP), a global action framework to enhance interna- into opportunities by lowering the cost of energy and tional cooperation to accelerate the shift towards sus- guaranteeing stable generation costs. This in turn would tainable consumption and production patterns in both increase the profitability of the tourism sector, support developed and developing countries. Due to its increas- environmental preservation, and improve the contribu- ing economic importance, sustainable tourism (includ- tion of the sector to the socio-economic development ing ecotourism) has been recognised as a key vehicle of SIDS. for sustainable development and has been integrated as one of the five initial programmes under the 10YFP. Figure 7 compares the cost of electricity generation Finally, 30 SIDS have joined the SIDS DOCK, a collective in islands for a variety of RETs with that of diesel-fired institutional mechanism created in 2012 to support the generators. Electricity costs are currently high in most transition towards sustainable energy in SIDS, in line SIDS, generally above USD 0.33/kWh in islands, and up with the UN Secretary-General’s Sustainable Energy for to more than USD 1/kWh in particularly small islands All (SE4All) initiative. (e.g., Levanzo in Italy and remote outer islands in the Pa- cific) against USD .0 26/kWh in European Union member states, as result of several related factors, including 1.2 An opportunity for the tourism (IRENA, 2013a): sector to increase profitability ●● Long distance from major oil refining and distri- and reduce socio-economic bution hubs; vulnerability ●● Lack of modern port facilities on some islands; ●● Lack of fuel storage facilities on smaller islands, SIDS are highly reliant on fossil fuels for their energy mainly due to their limited size and economic supply . Tourism represents an important economic resources; driver for SIDS economies, and is at the same time highly ●● High costs of diesel-based power generation, dependent on a reliable, affordable and environmentally also due to the use of outdated technology. friendly energy supply. As a consequence, this makes SIDS’ tourism, and SIDS’ economies, vulnerable to However, the deployment of RETs in island tourism still changes in fuel import prices. Further, recent trends faces a variety of barriers, which can be summarised in show that global spending on ecotourism has increased three main categories: by 20% every year in the past few years (TEEB, 2009); 6% of international tourists pay extra for sustainable (1) Competitiveness of renewable energy options tourism options; and 25% would be willing to pay (technical and economic barriers); more for environmentally friendly destinations (WEF, (2) Access to capital and cost of financing (owner- 2009). In the case of Crete, Greece, a survey showed ship and financial barriers); and that 86% of the respondents would prefer to stay in (3) Institutional and technical capacity (policy and hotels equipped with RETs, and 75% of them would be knowledge gaps). willing to pay higher fees for staying in a hotel with RETs installed (Tsagarakis, Bounialetou, Gillas, Profylienou, These barriers will be discussed in detail in section 3 of Pollaki, & Zografakis, 2011). According to Tripadvisor,5 the report. to stay at an environmentally friendly hotel, 25% of tourists are willing to pay a 5-10% premium, and 12% are Moreover, climate change is already having a negative willing to pay a 10-20% premium. This is also confirmed impact on natural capital and ecosystems, on which by the case of the Lady Elliot Island Eco Resort in the island tourism extensively relies (Millennium Ecosystem Great Barrier Reef World Heritage Site, Australia, where

6 For more information, see http://195.76.147.227/renforus/ 5 http://www.tripadvisor.com/PressCenter-i134-c1-Press_Releases.html site/?p=2783

Renewable Energy Opportunities for Island Tourism 9 Figure 7. Typical Levelized Cost of Electricity ranges with weighted average for 2013. Graphs assume a 10% cost of capital.

0.60

0.50 Diesel-ﬁred electricity cost range

0.40 /kWh) 0.30 2012 2012

0.20

0.10 Fossil fuel-ﬁred electricity cost range in OECD LCOE in (USD LCOE

0.00 CSP CSP Biomass Biomass Geothermal Geothermal Hydro Small Hydro Small Hydro Hydro Large Hydro Large Hydro Onshore wind Onshore wind Onshore Oshore wind Oshore Solar PV: large Solar PV: large Solar PV: Solar PV: small Solar PV: small Solar PV: OECD Non-OECD

Source: (IRENA, 2014)

Assessment, 2005; IPCC, 2007). A study conducted by Regional organisations and national governments are UNDP estimated that sea-level rise of 1 metre is likely increasingly aware of the challenges fossil fuel-depend- to compromise the activities of 266 out of 906 tourism ent energy production poses to the long-term profit- resorts and 26 out of 73 airports in the Caribbean, and ability and environmental sustainability of the island that 49% of tourism resorts in the Caribbean Community tourism sector (IRENA, 2012c; AOSIS, 2012). The com- (CARICOM) would be damaged by extreme weather mitment of island nations to increase renewable energy events and coastal erosion (Simpson, et al., 2010). penetration and reduce energy waste through energy In particular, costal and marine ecosystems provide efficiency improvements is demonstrated by the nu- services to the tourism sector in islands, including merous policies and strategies that have been adopted healthy reef attractions, sheltered beaches, protection for the enhancement of energy security (see Annex III). of infrastructure from extreme weather events such as However, there is still much to be done in order to ac- storms and floods, as well as provision of fish and other celerate the transition to renewable energy and reduce seafood. The progressive reduction of these essential dependency on fossil fuel imports. services caused by climate change-related phenomena – coastal erosion, sea-level rise, coral bleaching, Building on these considerations, the following section changes in fish species, alteration of mangrove and reef analyzes the main technology options available for ecosystems, reduced rainfall and the likelihood of more renewable energy deployment in island tourism facili- frequent and more intense seasonal storms – is reducing ties. Subsequently, the main barriers to a transition to the attractiveness of island tourism destinations. renewable energy are discussed, together with enabling Extreme weather events are increasing in frequency conditions and best practices. Finally, several case stud- due to climate change, which creates the perception ies are proposed where challenges were turned into that islands are risky tourism destinations. opportunities for the island tourism sector.

10 Renewable Energy Opportunities for Island Tourism 2 TECHNOLOGY ASSESSMENT: INVESTMENTS, AVOIDED COSTS AND ADDED BENEFITS

Most island tourism energy needs are fulfilled through USD 300/kW for SWH, USD 1,800/kW for SAC, technologies powered by diesel based electricity. The USD 3,750/kWp for solar PV, and USD 4,000/kW for high cost of fossil fuel imports in most islands results SWAC. The payback period of each technology depends in commercial electricity tariffs that are higher than the on a number of factors, such as the amount of energy global average. In 2012 the average electricity price was consumed by hotels and the availability of renewable USD 0.33/kWh in Caribbean islands,7 USD 0.43/kWh8 resources (e.g., solar radiation). In general, several case in Hawaii and USD 0.33/kWh in Mauritius.9 In 2010 studies show that renewable energy investments in the electricity price in Pacific Island Countries ranged island hotels have a payback period between 1 and 11 between USD 0.39 and 0.44/kWh for both households years. (200 kWh/month) and commercial users (500 kWh/ month) (IRENA, 2013a). This is in comparison to an av- In addition to the economic benefits directly derived erage price of about USD 0.26/kWh in European Union from reduced energy costs, the transition to renewable member states, and USD 0.09/kWh in China and Can- energy will bring additional gains from the increased ada (European Commission, 2014). Since electricity is attractiveness of sustainable hotel businesses in the intensively used in hotels and other tourism facilities for eyes of eco-friendly travelers, whose choices are largely basic services such as air conditioning, lighting, cooking driven by hotels’ sustainability practices. Also, the well and heating, the island tourism sector faces difficulty being of island communities will be improved through competing with the majority of non-island destinations, the reduction of air pollution from fossil fuel combus- which have much lower energy costs. tion, as well as the creation of additional employment opportunities for the installation and maintenance of In response to this challenge, island hotels are RETs. Encouraging global trends are being observed, increasingly investing in RETs, which, thanks to with potential also for job creation in SIDS, as the num- declining costs, are now cost-competitive in most island ber of people directly and indirectly employed in the contexts compared to the high price of fossil fuel- renewable energy sector grew by 14% between 2010 based electricity (IRENA, 2013a; IRENA, 2012d; IRENA, and 2011 (REN21, 2012; REN21, 2013). 2012e). The levelized cost of electricity (LCOE) of SWH, SAC, solar PV and SWAC systems in islands ranges Overall, the shift to renewable energy production in between USD 0.04 and 0.26/kWh. The average upfront island tourism facilities implies the adoption of a new investment for these technologies varies depending investment model that takes into account the short-, on several factors, including the materials used, medium- and long-term financial returns from fuel sav- resource availability, and the distance of the island from ings and from access to the sustainable tourism market. technology producers. Considering average costs for Moreover, renewable energy investments bring environ- island settings, investments amount to approximately mental, social and economic benefits from a public sector perspective. Indeed, more secure and cleaner energy in islands is expected to increase economic resilience, 7 http://blogs.iadb.org/caribbean-dev-trends/2013/11/14/the-caribbean-has-some-of-the-worlds-highest-energy-costs-now-is-the- reduce expenditures on fossil fuel imports, improve air time-to-transform-the-regions-energy-market/ quality, and create employment opportunities for the 8 http://www.hawaiianelectric.com/heco/Residential/Electric-Rates/ local population. This is where the interest of the private Average-Electricity-Prices-for-Hawaiian-Electric,-Maui-Electric,- and-Hawaii-Electric-Light-Company and public sectors come together to shape a more sus- 9 http://ceb.intnet.mu/ tainable future.

Renewable Energy Opportunities for Island Tourism 11 Text Box 1 – Required investment and the Levelized Cost of Electricity of renewable energy technologies High electricity prices, mainly driven by the cost of imported fossil fuels, negatively impact the competitiveness and profitability of island tourism activities. Consequently, investments in renewable energy production in hotels and resorts located in islands are likely to generate positive returns, while reducing the vulnerability of the sector to increases in fossil fuel prices.

Investments are needed for the purchase, installation and maintenance of RETs. To assess their viability hotel owners and other operators should conduct a cost-benefit analysis to estimate the payback period of alternative technology options, and to quantify expected returns in the short, medium and long terms. The accurate estimation of the total costs associated with the adoption of renewable energy solutions in hotels should consider a variety of factors, which often change depending on the country context. In general, the key factors influencing the final investment costs include: quality of the technology chosen; transportation cost from factory to hotel; ease of installation; complexity and duration of bureaucratic procedures (e.g., for the import and installation of technologies); cost of import tariffs; and existing in-country knowledge (e.g., knowledge level of hotel personnel) regarding the installation and use of RETs (Hotel Energy Solutions, 2011b).

The levelized cost of electricity (LCOE), a measure of the overall competitiveness of energy technologies, can be used to assess the economic viability of the investment. In particular, the LCOE method consists of comparing the cost to install and operate an energy system and its expected life-time energy output. The calculation is done using the net present value method, in which upfront capital investments and payment streams over the technology’s lifetime are calculated based on discounting from a reference date (Kost, et al., 2013). The cash values of all the expenditures are divided by the cash values of power generation, yielding a final value measured in, for instance, USD/kWh. For this reason, the LCOE is increasingly used as a reliable indicator for comparing different energy technologies.

A dedicated LCOE calculator was developed by IRENA in order to compare the competitiveness of RETs with respect to diesel-powered systems in island tourism facilities. The tool allows the full customisation of renewable energy projects, including technology and financial assumptions. For illustrative purposes, the LCOE was calculated for a set of renewable energy projects that might be suitable for island hotels. The technologies assessed include roof mounted solar PV systems, SWH systems with 200 litres of capacity, SAC systems powered with evacuated tubes, trough solar thermal collectors, and SWAC.

Assuming a solar radiation of 1,700 kWh/m2/year, the LCOE of these solar energy technologies is calculated to be in the range of USD 0.04 – 0.26/kWh (see also Annex II for a detailed list of assumptions and additional results). As presented in Figure 8 and 9, this value should be compared with the price of diesel-generated electricity (e.g., the commercial electricity tariff in Fiji was USD .0 37/kWh in April 2014). More precisely:

●● Solar PV Rooftop: the LCOE of solar PV rooftop systems with a capacity factor of 18.5%, capital cost of USD 3,750/kW, and fixed annual O&M costs of USD 25/kW is USD .0 262/kWh, or USD 72.65/GJ. ●● SWH: the LCOE of an SWH system with capacity of 200 litres, capacity factor of 16%, capital cost of USD 300/kW, and fixed O&M costs of USD 30/kW is USD .0 042/kWh, or USD 11.68/GJ. ●● SAC: the LCOE of a SAC system powered with evacuated tubes, capacity factor of 30%, capital cost of USD 300/kW for evacuated tubes and USD 1,500/kW for a single-effect absorption chillers, and fixed O&M costs of USD 30/kW is USD 0.113/kWh, or USD 31.5/GJ. ●● SWAC: the LCOE of a SWAC system with a capacity factor of 100%, capital cost of USD 4,000/kW, and fixed O&M costs of USD 80/kW is USD .0 055/kWh, or USD 15.39/GJ.

12 Renewable Energy Opportunities for Island Tourism Figure 8. Range of LCOE estimations for PV, SWH, SAC and SWAC, under different CAPEX assumptions, compared to the business-as-usual solutions

350 1.2

300 1 250 0.8 Electric water heaters,

based on island electricity 200 Electricity price range in price and 90% eciency islands (diesel generators) Electric chillers, based on Electric chillers, based on 0.6 island electricity price and island electricity price and USD/GJ USD/kWh COP of 2.8 COP of 2.8 150

0.4 100

0.2 50

0 0 PV SWH SAC SWAC Low CAPEX Medium CAPEX High CAPEX baseline

Figure 9. Range of LCOE estimations for PV, SWH, SAC and SWAC, under different Weighted Average Cost of Capital (WACC) assumptions, compared to the business-as-usual solutions

350 1.2

300 1 250 0.8 Electric water heaters,

Electricity price range in based on island electricity 200 islands (diesel generators) price and 90% eciency Electric chillers, based on Electric chillers, based on 0.6 island electricity price and island electricity price and 150 COP of 2.8 COP of 2.8 USD/GJ USD/kWh

0.4 100

0.2 50

0 0 PV SWH SAC SWAC WACC 7.5% WACC 10% WACC 12% baseline

Renewable Energy Opportunities for Island Tourism 13 2.1 Solar water heating systems is the key component of the SWH system as it converts the sun’s radiant energy to heat. SWH systems can use SWH systems use solar heat to warm domestic wa- a variety of solar collector types for capturing solar ra- ter, offsetting the cost of gas/electric water heaters. diation, including unglazed flat plate, glazed flat plate, The average investment required to purchase an SWH integral collector storage (ICS), evacuated tube, and system in the islands is about USD 300/kW, and the parabolic trough. Hotels located in islands with high so- payback period can be as short as a few months (e.g., lar radiation can use less expensive flat plate or evacu- Turtle Beach Resort in Barbados) (Husbands, 2014). ated tube collectors for capturing solar radiation. Flat The LCOE of an SWH system with capacity of 200 litres plate collectors consist of a single flat-plate absorber, is USD 0.042/kWh in islands with good solar radiation while evacuated tube systems are composed of multi- (1,700 kWh/m2). SWH systems are generally commer- ple evacuated glass tubes. Flat plates are generally less cially available, and are already extensively used in expensive and require less maintenance than evacuated tourism facilities on many islands, including the major- tubes. On the other hand, evacuated tubes minimise ity of small Pacific islands (IRENA, 2013a), an increasing heat losses due to the insulating effect of the vacuum, number of islands in the Caribbean (Barbados being and are particularly suited for cloudy, colder climates the regional champion) (Shirley & Kammen, 2013), and with limited annual solar radiation. Figure 10 shows a islands in the Indian Ocean, such as Mauritius (GoM, type of SWH system commonly used in island hotels, 2009). Nevertheless, there are still significant opportu- consisting of roof-mounted flat-plate solar collectors nities for expansion. paired with a water heater/solar storage tank.

The main components of an SWH system include the There are two main classifications of SWH systems: “ac- solar collector and the balance of system, which in- tive” and “passive.” Active systems use an electrically cludes the collector-storage loop, the storage tank and, driven pump and an electronic controller to circulate depending on system type, heat exchanger(s), pump(s), a heat transfer fluid between the collector and solar auxiliary devices and/or controllers. The balance of storage when solar energy is available. Passive systems, system and installation both generally cost more than including ICS and “thermosiphon” types, use no pumps the collector (IRENA, Forthcoming 2014). The collector or controls, relying instead on water main pressure to

Figure 10. Schematic representation of a solar water heater. Source: Australian Government

Roof mounted hot water Heated storage tank water

Roof mounted solar collectors

Cold water Heater water to inlet internal fixtures

14 Renewable Energy Opportunities for Island Tourism Text Box 2 – The solar water heater industry in Barbados In Barbados the SWH industry emerged in the early 1970s, thanks to the perseverance and awareness-raising campaigns of industry champions (e.g., the company Solar Dynamics) and to financial incentives provided by the government (e.g., tax breaks on raw materials and preferential loans) (CDKN, 2012). As a result, over 40,000 solar water heaters had been installed on the island by 2008, and over 50 hotels have solar water heating units (Commonwealth Secretariat, 2012). It was estimated that, between 1974 and 1992, SWH produced total energy savings of USD 50 million (Perlack & Hinds, 2008). In comparison, the estimated cost of the government incentive program (i.e., consumer deduction and duty-free importation of raw materials) over the same period was approximately USD 6.6 million (Perlack & Hinds, 2008).

move heated potable (drinking) water to the delivery In climates where freezing can occur, active/indirect point (faucet or shower). systems are used, utilizing a heat exchanger between the solar collector piping loop and the solar storage Systems can be further classified as either “direct” or containing potable water. The heat exchanger sepa- “indirect.” Direct SWH systems have no collector loop rates the collector loop fluid (usually propylene glycol, a heat exchanger; potable water is heated directly in the freeze-resistant non-toxic antifreeze) from potable wa- solar collector. ICS and most thermosiphon systems ter in the solar storage tank. Indirect systems are gener- are direct/passive systems, and are dominant in warm ally freeze-resistant and are dominant in cold climates climates because they are less expensive and perform (IRENA, Forthcoming 2014). about the same as active systems (IRENA, Forthcom- ing 2014). In a tropical or sub-tropical island context, a The size of an SWH system required for supplying hot passive/direct system would be the most cost-effective water to hotel facilities depends on hotel capacity, solution. average hot water consumption, and the site’s solar

Figure 11. Range of LCOE estimations for SWH, under different Weighted Average Cost of Capital (WACC) assumptions, and compared to the cost of electric water heaters based on island electricity prices

350 1.2

300 1 250 0.8 Electric water heaters,

based on island electricity 200 price and 90% e ciency 0.6

150 USD/GJ USD/kWh

0.4 100

0.2 50

0 0 SWH WACC 7.5% WACC 10% WACC 12% baseline

Renewable Energy Opportunities for Island Tourism 15 resource. SWH systems are cost-effective, especially for depending on the insulating materials and methods, hotels on islands with consistent sunshine throughout the construction materials, the effectiveness of bonding the year. The payback period largely depends on total between collector tubes and fins, the thermal conduc- annual solar radiation, the exposure of the tourism facili- tivity of tubes and fins, the corrosion resistance of the ty to solar radiation, and on the alternative options avail- exposed parts and water contacts, and the life span of able for water heating. In the case of hotels on islands, the entire system under different climatic conditions the payback period is usually less than one year. This (Raisul Islam, Sumathy, & Ullah Khan, 2013). is due to the high costs of electricity (when produced with diesel generators) and the abundant solar energy In order to assess the cost competitiveness of SWH resource in most SIDS. systems installed on island hotels, the LCOE was calculated using different assumptions. Figure 11 shows The investment required to install and produce hot the range of LCOE for SWH systems under different as- water from SWH systems depends on various factors, sumption scenarios. Results show that the LCOE would including the amount of solar radiant energy reaching be USD 0.031/kW, USD 0.042/kW and USD 0.053/kW the surface on which the technology is installed. Since under low, medium and high CAPEX scenarios, respec- many islands are endowed with abundant solar radia- tively, and assuming a discount rate of 10%. In the case tion, the cost-effectiveness of solar energy technologies of lower or higher cost of financing, an SWH system with is relatively high. The average capital investment cost medium CAPEX would have an LCOE of USD 0.038 and for flat plates and evacuated tubes (thermosiphon and 0.045/kW (discount rate of 7.5% and 12.1%, respective- pumped) systems with plant size of 2.1-4.2 kW var- ly). These LCOE results are calculated assuming solar ies between USD 150/kW and 635/kW in China, and radiation of 1,700 kWh/m2/year and capacity factor of between USD 1,100/kW and 2,200/kW in OECD coun- 16% (see Table 1). tries (REN21, 2013). In general, costs can vary greatly

Table 1. Summary table of key assumptions used for LCOE calculation of SWH systems

Technology Assumptions Collector Area (m2) 3 Capacity (kW/m2) 0,75 Solar Radiation (kWh/m2/year) 1700 Capital Cost (USD/kW) 150 – 300 – 450 Fixed O&M (USD/kW) 30 Variable O&M (USD/kWh) 0 Capacity Factor 16% Degradation 0.5% Financial/Economic Assumptions Debt Percentage 70% Debt Rate 6% – 8% – 10% Debt Term (years) 10 Economic Life (years) 25 Cost of Equity 11% – 14.7% – 17% Discount Rate 7.5% – 10% – 12.1% LCOE USD 0.031-0.053/kWh

16 Renewable Energy Opportunities for Island Tourism Text Box 3 – Ice: a cost-effective thermal energy storage solution A promising and cost-effective thermal energy storage solution is the making of ice. Ice storage systems freeze large amounts of water using thermal energy when the price of electricity is low, usually at night. The ice is then used to cool the glycol solution contained in chillers and provide air conditioning to buildings when daytime electricity costs are much higher. Ice tanks represent an opportunity to maximise the capacity of solar PV systems by storing energy using technology that is less expensive than batteries. In this sense, ice storage is a low-cost option to overcome technical problems related to the intermittency of solar thermal energy.

Approximately 8,000 ice storage systems for air conditioning are in use worldwide. The total capacity of refrigerated warehouses was about 460 million cubic metres in 2012 (IRENA, 2014). Ice storage is particularly effective in island tourism contexts, especially considering that most island hotels provide continuous air conditioning to their rooms, and that peak time is in the evening, when solar energy is not available. An example of hotel application is the Ritz Carlton Plaza of Osaka, where 16 sets of ice storage tanks with unit capacity of either 140 or 70 m3 were installed. With a total thermal storage capacity of 80,750 kWh, the system reduces energy consumption for pumps and air conditioning by 33%. Because there are no moving parts, maintenance costs for ice storage tanks are minimal; water level and glycol concentration should be checked annually.

2.2 Solar Air Conditioning systems SAC is an established and commercially available technology that has been deployed in hotels and resorts as it SAC systems use thermal energy to provide cooling and significantly reduces the peak electricity demand asso- heating, thereby offsetting the cost of diesel-generated ciated with conventional cooling. Well-insulated storage electric heating and cooling services in island hotels. The tanks for chilled water also allow the system to operate average cost of a SAC system is about USD 1,800/kW, at night and on cloudy days. Moreover, waste heat from and the payback period ranges between five and ten the cooling circuit can be used to provide domestic hot years, depending on the technology used and the an- water, if a closed-circuit cooling system is used for the nual energy consumption for heating and cooling ser- chiller, instead of an evaporative tower. This can provide vices in each hotel. The LCOE of a SAC system powered input for a heat pump, which will increase the tempera- with evacuated tubes and using a single effect absorp- ture of waste heat to the level necessary for domestic tion chiller is 0.113 USD/kWh in islands with good solar hot water. Costs, efficiency levels, capacities and operat- radiation (1,700 kWh/m2). ing temperatures vary depending on the type of tech-

Text Box 4 – Solar air conditioning in Aegean islands hotels The use of solar air conditioning in island hotels has proved successful in reducing energy costs and emissions. A study conducted in three hotels in the northeast Aegean area in Greece estimated average energy savings

of 6,820 MWh/year per hotel, corresponding to an emission reduction of 7.2 tCO2/year per hotel (Mamounis & Dimoudi, 2005). In Crete, Rethymno Village Hotel has installed a closed-cycle SAC system with an absorption chiller, powered by 450m2 of solar thermal collectors installed on the roof of the hotel. According to the hotel owner, the cooling system (purchased and installed at a total cost of €146,000, or USD 200,000) has a payback time of five years, saving 70,000 kWh of electricity for cooling and 20,000 liters of diesel oil for heating every year (Mamounis, N., & Dimoudi, A. (2005)).

Renewable Energy Opportunities for Island Tourism 17 nology. Systems deployed in warmer regions such as Thermally driven chillers can be divided into two cat- resort islands are cost-competitive and highly efficient egories: adsorption and absorption chillers. when compared to electric chillers driven by expensive diesel-generated electricity. In islands with high solar ●● Adsorption chillers can be driven by hot water at radiation the payback period for solar air conditioning temperatures as low as 55-60 °C, with optimal is estimated at about ten years (Hotel Energy Solutions, efficiency usually reached at around 80 °C. These 2011a). machines do not require toxic refrigerants, as they use water as a refrigerant along with a solid, SAC consists of a solar thermal system composed of adsorbent material as a “sorbent” (i.e., silica gel solar collectors, storage tank, electronic controls, pipes, or zeolites). Typical size ranges between 5 and pumps and a thermally driven cooling machine (see 500 kW of cooling power. Annex I for more details). Like SWH, SACs can use flat ●● Absorption chillers work using both a refrigerant plates or evacuated tube solar collectors. For higher- and a sorption material in liquid phases. For air efficiency chillers, concentrating solar thermal (CST) conditioning and refrigeration, the refrigerant technologies can be used to reach higher temperatures, is water, while the sorption material is often which are not necessary for domestic hot water produc- a solution of Lithium bromide (LiBr) and tion. water, or Lithium chloride (LiCl) and water. For

Figure 12. Schematic representation of a SAC system with parabolic trough.

Source: http://www.china-aircon.com/

18 Renewable Energy Opportunities for Island Tourism freezing applications, water cannot be used SWH systems). On the other hand, more advanced CST as a refrigerant, therefore water can be used technology is required to power double and triple-effect as sorption material, while the refrigerant is absorption chillers. The average cost of installing a solar commonly ammonia (NH3). Where substantial air conditioner is estimated at about USD 8,000/kW freezing needs exist in the tourism sector, an (Woerpel, 2012) and the average capital investment NH3/water absorption chiller can provide deep for CST technologies is between USD 4,600/kW and freezing, refrigeration and air conditioning. Once 7,700/kW (see Table 5). a properly sized solar thermal system is in place, it is also possible to drive separate thermally- In order to assess the cost competitiveness of SAC driven chillers for different applications, as they systems installed in island hotels, the LCOE was cal- all require hot water and a very limited amount culated using different assumptions. Figure 13 shows of electricity to run. the range of LCOE for SAC systems under different assumption scenarios. Results show that the LCOE would Figure 12 shows a schematic representation of a SAC be USD 0.078/kW, USD 0.113/kW, or USD 0.149/kW system installed in a five-floor building. The system rep- under low, medium and high CAPEX scenarios, re- resented in the image uses parabolic trough concentrat- spectively, assuming a discount rate of 10%. In the case ing collectors and an absorption chiller. of lower or higher cost of financing, a SAC system with medium CAPEX would have an LCOE ranging The cost of SAC systems varies greatly depending on between USD 0.095/kW (discount rate of 7.5%) and the level of sophistication of the technology. In particu- USD 0.128/kW (discount rate of 12.1%). These LCOE lar, flat plates and evacuated tubes are the least expen- results are calculated assuming solar radiation of sive solar collectors that can be installed in hotels and 1,700 kWh/m2/year and capacity factor of 30% (see resorts for cooling purposes (the average cost of flat Table 2). plates and evacuated tubes is the same indicated for

Table 2. Summary table of key assumptions used for LCOE calculation of SAC systems, and results

Technology Assumptions Concentrator Area (m2) 40 Capacity (kW/m2) 0,75 Solar Radiation (kWh/m2/year) 1700 Capital Cost evacuated tubes (USD/kW) 150–300–450 Capital cost absorption chiller single effect (USD/kW) 1,000-1,500-2,000 Fixed O&M (USD/kW) 30 Variable O&M (USD/kWh) 0 Capacity Factor 30% Degradation 0,5% Financial/Economic Assumptions Debt age 70% Debt Rate 6%–8%–10% Debt Term (years) 10 Economic Life (years) 25 Cost of Equity 11%–14.7%–17% Discount Rate 7.5%–10%–12.1% LCOE USD 0.078-0.149/kWh

Renewable Energy Opportunities for Island Tourism 19 Figure 13. Range of LCOE estimations for SAC, under different Weighted Average Cost of Capital (WACC) assumptions, and compared to the cost of electric chillers, based on island electricity prices and COP of 2.8

0.5

0.45 120 0.4

0.35 100 Electric chillers, based on 0.3 island electricity price and 80 COP of 2.8 0.25 USD/GJ USD/kWh 60 0.2

0.15 40

0.1 20 0.05

0 0 SAC WACC 7.5% WACC 10% WACC 12% baseline

2 .3 Sea Water Air Conditioning near shore heat exchanger to the hotel. In this context, systems hotels in islands have a comparative advantage, since they are generally located at reasonable distance from SWAC systems use cold water from the ocean depths the sea. Also, the upfront investment is repaid faster to provide air conditioning service in hotel rooms and in hotels that have a large, year-round air conditioning facilities. The average investment required is about load. SWAC heat exchangers are generally expensive USD 4,000/kW of air conditioning load, and the pay- due to the fact that they are made of titanium to avoid back period is between 5 and 11 years (e.g., see Section corrosion from salt, with the average cost of a titanium 5.2). The LCOE is USD 0.055/kWh. This technology, heat exchanger reaching about USD 2,600 per kW of which has been installed in few island hotels so far, re- cold water pumping power.10 Investments in SWAC in quires an upfront investment higher than SAC systems, islands are likely to be paid back in a shorter time than but it is viable (and overall more economical) if the tour- elsewhere, given the high electricity tariffs and intensive ism facility is close to a deep-water resource and has a use of air conditioning in the majority of island tourism large cooling demand, generating considerable savings facilities. According to the UNWTO-led Hotel Energy that offset the higher capital costs. Solutions project, SWAC systems can satisfy up to 90% of the cooling load, with a proportionate reduction in In SWAC systems, cold water is pumped up from the electricity bills for air conditioning, in most hotels (Hotel ocean and passed through a heat exchanger to cool the Energy Solutions, 2011a). hotel building’s chilled water down to 7°C for air conditioning (Hotel Energy Solutions, 2011a). Figure 14 gives The upfront investment for the purchase and installation an illustration of SWAC function. The cost of installing of a SWAC system depends on several variables, includ- SWAC systems is driven primary by the depth required

to reach sufficiently cold sea water and the distance 10 http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.301.2280 required to pump the chilled fresh water from the &rep=rep1&type=pdf

20 Renewable Energy Opportunities for Island Tourism Figure 14. Schematic representation of the sea water air conditioning (SWAC) system installed at The Brando resort, French Polynesia.

Source: http://eandt.theiet.org/

ing the required water flow rate, the length of pipes, and project, which aims to develop a 25,000-ton (about the measures needed to protect the pipes. In general, 88 MW) seawater air conditioning district cooling sys- SWAC systems require high initial investments but have tem for commercial and residential buildings (including very low operations and maintenance (O&M) costs. hotels) in downtown Honolulu. Both private actors and Feasibility studies conducted in the island of Curacao public institutions fund the HSWAC project, which has a showed that a capital investment of between USD 2 and total estimated cost of about USD 250 million. Private 5 million would be required to provide air conditioning investors from Hawaii, Minnesota and Sweden are pro- loads from 2 to 7.5MW (corresponding to cooling of viding USD 17 million, and the remainder of the project 540 to 2,100 hotel rooms), assuming a seawater intake is funded with public debt.11 pipeline length of between 1.6 and 3.6 km. The payback period for these systems was estimated at between five In order to assess the cost-competitiveness of SWAC and six years for sites close to the sea and with high systems installed in island hotels, the LCOE was calcu- air conditioning requirements, and from 9 to 17 years lated using different assumptions. for the sites with the smallest air conditioning loading (Broeze & ven der Sluis, 2009). Figure 15 shows the range of LCOE for SWAC systems under different assumption scenarios. Results show that Having multiple investors join forces to purchase and the LCOE would be USD 0.042/kW, USD 0.055/kW and install SWAC systems might be an effective way of USD 0.069/kW under low, medium and high CAPEX sharing high upfront costs. An example of this investment model is the Honolulu Seawater Air Conditioning 11 http://www.honoluluswac.com/

Renewable Energy Opportunities for Island Tourism 21 Text Box 5 – Installation and operation of SWAC systems in island hotels Although SWAC systems are relatively new, they have been planned or already installed at island hotels and resorts in Aruba, Hawaii, Mauritius, Tahiti (Honolulu) and Tetiaroa atoll in French Polynesia. For example, the Intercontinental Bora Bora Resort and Thalasso Spa in Bora Bora, Tahiti installed the first operational SWAC system in 2006. This system extracts ocean water from a depth of 900 metres, and uses it for providing air conditioning to the entire resort complex. The SWAC system allowed the hotel to save about 80-90% of the electricity used by the electric cooling systems, with total electricity consumption savings estimated at 2.4 GWh/year (Neiva de Figueiredo & Guillén, 2014). Another SWAC system was successfully installed in The Brando resort, located in the Tetiaroa atoll. The system, which is represented in Figure 14, extracts cold water from a depth of 1,660 metres, and provides air conditioning service to its 35 private villas.

Other projects are under development; in Mauritius the Sustainable Energy Fund for Africa has approved a USD 1 million project preparation grant to support the Deep Ocean Water Application Project, which is

expected to prevent 40,000 tons of CO2 emissions every year, and create direct and indirect employment opportunities (AfDB, 2014).

In Aruba, a joint venture has been established between international private companies for the development of the Aruba District Cooling system, a USD 100 million project. The SWAC system will have 10,000 tons of cooling capacity (about 35 MW), and will provide air conditioning to the major resorts on Aruba’s western coast. The expected energy savings are about 50 million kWh every year, or USD 6 million per year (6% of Aruba’s total electricity consumption). The project, which is in line with the government’s target of Aruba

becoming 100% oil-independent by 2020, is expected to reduce CO2 emissions by about 35,000 tons every year (Dalin, 2012).

Figure 15. Range of LCOE estimations for SWAC, under different Weighted Average Cost of Capital (WACC) assumptions, and compared to the cost of electric chillers, based on island electricity prices and COP of 2.8

0.5

0.45 120 Electric chillers, based on 0.4 island electricity price and COP of 2.8 0.35 100

0.3

80 0.25 USD/GJ

USD/kWh 60 0.2

0.15 40

0.1 20 0.05

0 0 SWAC WACC 7.5% WACC 10% WACC 12% baseline

22 Renewable Energy Opportunities for Island Tourism scenarios, respectively, and assuming a discount rate ●● Roof mounted: PV panels are mounted onto of 10%. In the case of higher cost of financing, a SWAC the existing roof space of a hotel or other resort system with medium CAPEX would have an LCOE rang- building; ing between USD 0.047/kW (discount rate of 7.5%) and ●● Building integrated: PV panels are directly in- USD 0.062/kW (discount rate of 12.1%). These LCOE re- tegrated into the building during construction sults are calculated assuming a capacity factor of 100% or remodeling, for example PV on parking shade (see Table 3). structures; ●● Ground mounted: PV panels are mounted on a dedicated structure in available land near the 2.4 Solar Photovoltaic systems hotel or resort.

Solar PV electricity systems consist of panels that are Solar PV systems can be connected (on-grid, see exposed to light in order to generate direct current Figure 16) or not connected (off-grid, see Figure 17) to (DC) electricity, which is then converted to alternating the electricity grid. current (AC) electricity through an inverter. These systems allow hotels to fulfill their electricity needs through For hotels and resorts that are connected to an electrical on-site electricity generation, reducing the purchase of grid, the PV system will directly offset the cost of pur- electricity from utilities or on-site diesel generation. The chasing electricity from the utility. When sun is available average investment required for the purchase of grid- the PV system will supply electricity to the hotel, and connected solar PV systems in islands is USD 3,750/kW, feed any excess into the electrical grid. At night, when and the payback period is estimated in a range between the PV system is not producing, electricity will be drawn three to six years (Hotel Energy Solutions, 2011a). The from the electrical grid. For islands with a net metering LCOE of solar PV rooftop systems in an average tropical policy, hotels can offset up to 100% of their electricity island setting is about USD 0.262 /kWh. bill with PV. For islands that do not allow private generators to feed back electricity into the grid – or do not PV systems can be mounted in three main modalities: give adequate credit for it – the optimal size of the PV

Table 3. Summary table of key assumptions used for LCOE calculation of SWAC systems, and results

Technology Assumptions Project Capacity (MW) 1 Capital Cost (USD/kW) 3,000-4,000-5,000 Fixed O&M (USD/kW) 80 Variable O&M (USD/kWh) 0 Capacity Factor 100% Degradation 0,0% Financial/Economic Assumptions Debt Percentage 70% Debt Rate 6%–8%–10% Debt Term (years) 10 Economic Life (years) 25 Cost of Equity 11%–14.7%–17% Discount Rate 7.5%–10%–12.1% LCOE USD 0.042-0.069/kWh

Renewable Energy Opportunities for Island Tourism 23 Figure 16. Main components of grid-connected solar PV systems

Residential Grid Connected PV System Solar Panels

Inverter Utility Service

Meter Home Power/ Appliances

http://www.greenrhinoenergy.com/solar/technologies/pv_systems.php

Figure 17. Main components of an off-grid solar PV systems

PV Array

DC Electrical appliances AC

PV charge Battery DC-AC inverter/ controller bank charger

http://www.greenrhinoenergy.com/solar/technologies/pv_systems.php

system is limited (i.e., offsetting maximum 10-20% of the For hotels that are not connected to a utility grid, for electricity bill). example an isolated resort with its own diesel genera-

24 Renewable Energy Opportunities for Island Tourism Text Box 6 – Solar PV installations in island hotels The use of solar PV in households and commercial activities is expanding considerably in many islands, including both grid-tied and off-grid applications. In Grenada, for example, the electricity utility company GREN- LEC installed 18 rooftop grid-connected PV systems in hotels and households soon after the introduction of “feed-in tariffs” in 2007 (Schwerin, 2010). Solar PV systems are increasingly common in tourism facilities in Barbados; for example, the Harrison’s Cave tourist attraction has installed a grid-tied 60.1 kWp system to supply electricity to its lighting system (Commonwealth Secretariat, 2012). An example of an off-grid solar PV system successfully installed in an island resort is the 70 kWp system at Soneva Fushi resort in the Maldives. According to the resort managers, the cost for the purchase and maintenance of batteries did not reduce the overall profitability of the investment and further investments will be made to expand the resort’s solar capacity in the upcoming years (Sloan, Legrand, & Chen, 2013).

Another example of a successful solar PV installation in island tourism facilities is the Solar Power Project at Turtle Island resort in the Yasawa Islands, Fiji. This 240 kWp system is composed of 968 solar panels that produce 1.2 MWh of electricity every day, thus providing almost 100% of the island’s power needs. The project, which was completed in 2013 for a total cost of USD 1.5 million, reduces annual diesel costs for hotel electricity

by USD 250,000 and prevents 220 tons of CO2 emissions every year.

Source: http://www.turtlefiji.com/pretct/solar-project/

tor, PV-generated electricity directly offsets the cost of rapidly. It is noteworthy that the LCOE generation from diesel fuel. The amount of PV generation for off-grid solar PV has dropped by more than 50% over the last systems is limited by the need to keep the diesel gen- five years, and continues to decline (BNEF, 2013), while erator running reliably to provide a stable electricity total installed capacity grew from 40GW in 2010 to supply. Off-grid hotels wishing to drastically reduce 100GW in 2012 (REN21, 2013). By 2020, PV module or eliminate their diesel fuel consumption will need to prices might further be reduced by 40-60% (IRENA, install a PV system that includes storage, typically bat- 2012g; IEA-ETSAP & IRENA, 2013a). teries. This increases the cost of the system compared to the on-grid option. However, large PV systems with Where islands have good solar radiation and high elec- storage are usually economically viable given that the tricity tariffs, residential solar PV systems have already cost of electricity from small diesel generators in remote reached parity with electricity retail prices, especially islands is generally very high. due to the simultaneous reduction in technology costs and increase in global fossil fuel prices (IEA-ETSAP & The payback time for PV systems largely depends on IRENA, 2013a). As a result, investments in solar PV sys- electricity and/or fuel costs, solar radiation intensity, tems have increased considerably in recent years. and the cost of importing technology when not locally available; the payback time for Crystalline Silicon PV The cost of solar PV modules generally amounts to 30- modules installed in a location with solar radiation of 50% of the total cost of the system, while the remaining 1,700 kWh/m2/a is estimated in a range between three investment is in Balance of System components and and six years (Hotel Energy Solutions, 2011a). installation, whose cost varies between on-grid (50- 60% of the total cost) and off-grid systems (around Over the past three decades, the global average cost of 70%, including energy storage and back-up power). In PV modules has declined by 18-22% with each doubling 2013, the price of wafer-based monocrystalline silicon of the cumulative installed capacity, and specifically (c-Si) modules was about USD 600/kW (down from by 70% between 2009 and 2013 (IEA-ETSAP & IRENA, USD 4,000/kW in 2008). The price of thin film modules 2013a); large-scale deployment drove the prices down is slightly lower than c-Si modules, but price differences

Renewable Energy Opportunities for Island Tourism 25 Figure 18. Range of LCOE estimations for solar PV, under different Weighted Average Cost of Capital (WACC) assumptions, and compared to the electricity price range in islands (diesel generators)

300 1

250

0.8 Electricity price range in 200 islands (diesel generators)

0.6 150 USD/GJ USD/GJ USD/kWh USD/kWh 0.4 100

0.2 50

0 0 PV WACC 7.5% WACC 10% WACC 12% baseline

Table 4. Summary table of key assumptions used for LCOE calculation of solar PV rooftop systems, and results

Technology Assumptions Project Capacity (MW) 1 Capital Cost (USD/kW) 2,500-3,750-5,000 Fixed O&M (USD/kW) 25 Variable O&M (USD/kWh) 0 Capacity Factor 18.5% Degradation 0,5% Financial/Economic Assumptions Debt Percentage 70% Debt Rate 6%–8%–10% Debt Term (years) 10 Economic Life (years) 25 Cost of Equity 11%–14.7%–17% Discount Rate 7.5%–10%–12.1% LCOE USD 0.179-0.344/kWh

26 Renewable Energy Opportunities for Island Tourism between the two technologies are expected to converge LCOE results are calculated assuming solar radiation of in the long term (IEA-ETSAP & IRENA, 2013a). 1,700 kWh/m2/year and capacity factor of 18.5% (see Table 4). In order to assess the cost competitiveness of solar PV systems installed in island hotel applications, the LCOE Table 5 provides an overview of key indicators of invest- was calculated using different assumptions. Figure 18 ment that should be considered in the analysis of the shows the range of LCOE for solar PV rooftop systems four technologies presented in this study. These include under different assumption scenarios. Results show that capital costs for the purchase, installation and mainte- the LCOE would be USD 0.179/kW, USD 0.262/kW and nance of RETs, as well as LCOE estimates. or USD 0.344/kW under low, medium and high CAPEX scenarios, respectively, and assuming a discount rate The indicators presented in the table are neither exhaus- of 10%. In the case of lower or higher cost of financing, tive nor fully applicable to all island contexts. Rather, a solar PV system with medium CAPEX would have an the table reflects a generic set of indicators that can be LCOE ranging between USD 0.217/kW (discount rate of customised (i.e., expanded or narrowed down) to the 7.5%) and USD 0.296/kW (discount rate of 12.1%). These requirements and objectives of specific assessments.

Table 5. Indicators and costs of renewable energy investments in small island tourism facilities, by technology type Upfront capital investment Maintenance cost Technology Indicators Costs Indicators Costs Flat plate/evacuated tube: USD 150-300/kW Cost of technology Technology costs are lower for climates that do Cost of USD/kWp; USD/MJ not require anti-freezing precautions. Anti-freeze periodic Solar water (litres/day) (glycol) also slightly reduces the efficiency of mainte - USD 30/kW heating Cost of installation the heat transfer. They also vary depending on nance USD/kWp existing hotel plumbing systems, and locations (USD/kW) of solar collectors and existing water heaters. LCOE: USD 0.031-0.053/kWh Solar collectors: Parabolic trough: USD 4,600-7,100/kW Solar towers: USD 6,300-7,700/kW Fresnel Reflectors (FR) and Solar Dishes (SD): Cost of technology n/a Cost of USD/kWp; periodic Solar USD/MJ (ton) Chillers: mainte- USD 30/kW air condi- Cost of installation Single effect absorption chillers: nance tioning USD/kWp USD 1,000- 2,000/kW (USD/year) Installation costs: USD 8,000/kWp Technology costs are lower for warmer climates. They also vary depending on existing hotel plumbing systems. LCOE: USD 0.078-0.149/kWh Complete system: Cost of technology Cost of USD 4,000/kW mainte- Sea water USD/kWp; Cost of installation and technology depend on nance for air con- USD/MJ (ton) USD 80/kW the distance from the sea. salt corro- ditioning Cost of installation sion systems USD/KW Small systems have higher technology costs, but lower installation and transport costs. (USD/year) LCOE: USD 0.042-0.069/kWh

Renewable Energy Opportunities for Island Tourism 27 Upfront capital investment Maintenance cost Technology Indicators Costs Indicators Costs On-grid systems: USD 2,500-5,000/kW for rooftop installations in islands. Utility scale projects in larger countries are characterised by Cost of Cost of technology lower costs. mainte- USD/kWp; nance for Off-grid systems: USD 6,250/kW for a 240 kWp cleaning USD 25/kW Solar PV Cost of installation PV-diesel hybrid (90% PV) system with storage from dust USD/KWp (e.g., the system installed at Turtle Island resort, and sand Fiji. Actual cost depends for off-grid systems (USD/year) depend heavily on the amount of storage installed). LCOE: USD 0.179-0.344/kWh

Text Box 7 – Avoided costs and added benefits from RET uptake and use

Avoided costs An important outcome of investments in RETs is the accrual of cost savings. An increase in the use of renewable energy is likely to:

(1) Reduce costs currently incurred by public and private entities as a result of the avoided purchase of imported fossil fuels; and (2) Avoid potential future costs deriving from the depletion of natural capital and ecosystem degradation.

Consequently, an integrated analysis of the impacts of shifting to renewable energy production in island tourism facilities should include the estimation of potential avoided costs, using historical and current data on the environmental, social and economic performance of the island.

First, avoided costs should be measured in relation to the energy bill of an establishment, and how it would change when RETs are deployed. Secondly, sustainable energy production curbs social costs (e.g., cost derived from health impacts caused by fossil fuels combustion) associated with air and water pollution. Finally,

reduced CO2 emissions will contribute to climate change mitigation, thereby indirectly reducing costs associated with climate change impacts.

Relevant studies that quantify social and environmental avoided costs of installing RETs in island tourism facilities are still missing, mainly due to a lack of reliable data. However, the devastating impacts of oil spills are known. On the other hand, several case studies demonstrate the direct cost reduction impact of RETs in island hotels and resorts. For example, the SWH systems installed at Turtle Beach resort in Barbados contribute to a reduction in energy consumption of 372,040 kWh every year, corresponding to annual savings of about USD 103,427 (at 2013 electricity prices) against an upfront investment of USD 200,000 (Husbands, 2014). Similarly, the installation of solar PV panels in the Soneva Fushi Resort, Maldives, which required an initial investment of USD 300,000 for the fulfillment of 3% of total energy supply, has a payback time estimated at seven years (UNESCAP, 2012).

Table 6 presents a sample of indicators for measuring economic, social and environmental avoided costs originating from renewable energy investments in island tourism.

28 Renewable Energy Opportunities for Island Tourism Table 6. Avoided costs resulting from renewable energy investments in tourism facilities, by actor type.

Economic Avoided Costs Social Avoided Costs Environmental Avoided Costs Reduced losses from ecosystem deterioration (USD/year) Avoided compensation to Reduced costs of damages from local communities for dam- climate change related disasters Private Energy bill savings (USD/year) ages caused by pollution (USD/year) (USD/year) Reduced cost of fines in case of local pollution, like fuel spills (USD/year) Reduced fossil fuel import costs (USD/year; % of GDP) Avoided loss of employ- Reduced costs of replacement of ment and income due to an ecosystem services Avoided fossil fuel subsidies to underperforming economy (USD/year) Public tourism sector (USD/year) (USD/year) Reduced costs of damages from Improvement of the trade bal- Reduced costs of public climate change related disasters ance due to reduced import of health care (USD/year) (USD/year) fossil fuels (USD/year)

Added benefits The correct estimation of economic returns is an essential step for the assessment of RETs. In order to fully appreciate the advantages of renewable energy investments, an integrated and cross-sectoral analysis should be carried out that also considers the socio-economic, environmental and reputational returns that might not be visible in the short term. These outcomes of investments in RETs are increasingly featured in Corporate Social Responsibility reports, and are becoming a core pillar of sustainability strategies. Furthermore, the avoided costs could be reinvested in socially and environmentally responsible local activities, such as local transportation and staff training, increasing the indirect and induced effects of tourism expenditure on local development.

In addition to economic returns deriving from market dynamics, the assessment of the impacts of RETs should include an estimation of societal and environmental benefits. In particular, additional local employment can be generated by the installation and maintenance of clean energy technologies. As a result, new opportunities for income creation and expertise development will be created for local communities. Worth noting, the number of people directly and indirectly employed in the renewable energy sector grew by 14% yearly between 2010 and 2013, going from 5 million to 6.5 million people (REN21, 2012; REN21, 2013; IRENA, 2014). The total number of people working in the solar PV sector (manufacturing and installation/maintenance) amounted to 2.3 million in 2013; total employment in solar heating and cooling expanded from 120,000 in 2005 to 500,000 in 2013; and 43,000 people were employed in the concentrating solar power sector in 2013 (IRENA, 2014).

Added benefits deriving from improved environmental management should be quantified. In particular, economic advantages would derive from the preservation of healthier ecosystems – such as coral reefs, beaches and forests – which are inextricably linked to the attractiveness and profitability of island tourism. Quantify- ing the economic value of natural capital and ecosystem services, and how these values are affected by the import and use of fossil fuels, will inform decision making and lead to strategies that deliver multiple benefits to visitors, tourism companies and, in general, island economies.

One example of added benefits derived from the use of RETs in island tourism is the case of the Soneva Fushi by Six Senses Resort and Spa, located in the Maldives. In 2009, the Soneva Fushi installed a 70kW off-grid PV power plant and five SWH systems as a first step in achieving a net-zero carbon footprint (Soneva Resorts,

Renewable Energy Opportunities for Island Tourism 29 2013). The environmentally friendly vision of this Maldivian hotel generated additional business and increased customer loyalty, thereby bringing additional economic benefits (WWF, Horwarth HTL & HICAP , 2010). Table 7 provides a sample of indicators for measuring economic, social and environmental benefits of RETs. A dis- tinction is made between benefits directly accruing to hotel businesses (e.g., increase in tourist arrivals) and the indirect advantages enjoyed by the public sector and island residents as result of improvements in local economies and sustainability practices.

Table 7. Indicators of added benefits resulting from renewable energy investments in tourism facilities, by actor type.

Economic Benefits Social Benefits Environmental Benefits Increased access to global ecotourism markets (% or USD/year) Premium price for sustainable Improved relationships with tourism (%; USD/year) Increased tourist arrivals due to island communities Private healthier ecosystems Additional revenues from (n. of protests against hotel (tourists/year; USD/year) improved hotel reputation/cus- pollution or noise/year) tomer loyalty (USD/year). New revenues from the sale of self-produced electricity to utility companies (USD/year) Income generation for local Increased revenues from taxes population as result of a on tourism as result of in- growing tourism industry Improved air quality (Air Quality Public creased private profits (USD/year). Index) from reduced emissions. (USD/year; % of GDP). Poverty reduction (% poor population).

30 Renewable Energy Opportunities for Island Tourism 3 BARRIERS, ENABLING CONDITIONS AND BEST PRACTICES

Increasing the use of renewable energy in the tourism can be combined to create enabling conditions for the sector of islands can improve the sector’s profitability purchase of RETs: while creating employment and reducing environmental impacts. While these considerations have led many (1) Capital investment, e.g., the expansion of the island tourism businesses to invest in RETs, the majority power grid in order to allow independent power of island hotels and resorts still rely on expensive, diesel- producers to sell surplus electricity to utilities, based electricity, and the share of renewable energy use thereby reducing the payback periods of renew- has been declining in islands in recent years. Although able energy investments, or the purchase of an islands present very different geographical, social, eco- equity stake on RET projects; nomic, environmental and cultural features that require (2) Incentives and disincentives to increase tech- specific and customised analysis of challenges and nology competitiveness, lower upfront invest- opportunities for each context, it is still possible to iden- ment costs and improved access to credit. Exam- tify broad categories of potential barriers to renewable ples include the introduction of feed-in tariffs or energy deployment in island tourism facilities, and to tax rebates, as well as preferential loan terms for identify existing policy options and best practices to the purchase of RETs; overcome those barriers and accelerate the transition (3) Public targets mandated by law, such as the es- to a more sustainable and profitable tourism sector in tablishment of renewable energy quotas, or the islands. setting of mandatory renewable energy targets for hotels; and There are three main barriers to be considered for the (4) Institutional and technical capacity building, deployment of renewable energy in island states: e.g., the promotion of educational programs and specialised training on RETs, the establishment (1) Competitiveness of RE options (technical and of dedicated institutional bodies such as coor- economic); dinating agencies for renewable energy deploy- (2) Access and cost of capital (ownership and finan- ment, and the strengthening of international and cial); regional cooperation mechanisms on renewable (3) Institutional and technical capacity (policy and energy in order to overcome technical and insti- knowledge gaps). tutional capacity barriers (Bassi, Deenapanray, & Davidsen, 2013). Each of these barriers can be addressed with the proper tools. The estimation of the LCOE of RETs tackles com- In the following sections, four best-practice examples petitiveness concerns, and informs financing consid- are profiled of the effective use of policies to stimulate erations by showing that the cost of RETs is lower than investments in RETs in the tourism sector of islands. diesel-generated electricity over the lifetime of the in- In particular, net metering policies, innovative leasing vestment. Policies can be designed and implemented to schemes and low-interest loans are discussed as a improve access to capital and bridge knowledge gaps, means of improving access to credit and lowering the so that the benefits of RETs extend to the broader com- barriers posed by the principal-agent problem. munity rather than be confined to the tourism sector. Fi- nally, best practices can demonstrate activities that can be undertaken to create and improve the institutional knowledge base and policy design.

Four policy instruments are available to island governments to overcome these barriers. One or more of them

Renewable Energy Opportunities for Island Tourism 31 3 .1 Barriers to technology resilience, it is also worth considering that islands are deployment particularly vulnerable to climate change, including sea-level rise, extreme weather events, and changes in wind speed, which could affect solar energy installa- 3 .1.1 Competitiveness of RET options tions, and fluctuating rainfall patterns, which are likely (technical and economic barriers) to influence the production of hydropower. Therefore, Renewable energy options are not always perceived to public and private investments in renewable energy be competitive with diesel-based power generation. should be informed by in-depth assessments of current The main barriers include their at times more limited and expected climatic conditions in each island context range of use and a potentially challenging integration (IRENA, 2013a). with the existing electricity grid. 3 .1.2 Access to capital and cost of financing The cost of RETs is directly related to the access to (ownership and financial barriers) financing and its cost, especially if money needs to be borrowed to purchase and install RETs. On the other The competitiveness of RETs also creates challenges for hand, given the lifetime of these technologies, the vi- the mobilisation of financial resources needed to pur- ability of the investment should not be based only on chase, install and use them. In particular, hotel owners the upfront capital cost. The LCOE offers an assessment and other tourism operators in islands generally have of the incidence of capital and O&M as well as financing limited access to credit lines for the financing of small- costs throughout the lifetime of the investment. This scale renewable energy projects. Considering the high approach allows the fixed and variables costs of energy upfront investment needed for the purchase and instal- generation RETs to be compared, as well as to deter- lation of RETs (e.g., solar PV and SWAC systems) and mine how these would change in the short, medium the limited cash flow of small tourism activities, access and longer terms, and compare them with diesel-based to loans at concessional interest rates is key to remove electricity production. financial barriers to the deployment of RETs. In addition to restricted access to national credit by private tourism The limited range of use of RETs relates to their capabil- companies, smaller islands often lack the domestic ex- ity to generate electricity when it is needed (e.g., in the pertise in applying to international funding mechanisms evening, after sunset, in relation to the use of PV). While for renewable energy development. For example, it was challenges do exist, as indicated in Section 2, most RETs reported that only 10% of SIDS were able to apply for have the capability to generate power at all hours of the funding in the framework of the European Union Energy day and night (e.g., SWAC). With solar energy, SWH has Facility (Strachan & Vigilance, 2011). the capacity to store energy, and batteries can be added in PV systems. Also in this case the LCOE can inform the Another key challenge for the shift to sustainable energy estimation of the levelized cost of energy supply, sup- production and consumption in the tourism sector is porting investment decisions. related to the ownership status of hotels and resorts, and especially to the so-called principal-agent problem The challenge of integration relates to local policies (Jaffe & Stavins, 1994). Since the managing company (e.g., whether a feed-in tariff is provided) and to pos- (agent) of many resorts and hotels is a different sible technical challenges (on top of variations in costs) entity than the owners (principal), there is difficulty in for on-grid and off-grid installations. This challenge is motivating the principal to invest in the development closely related to knowledge gaps, in the context of of renewable energy solutions, as the energy bill is institutional and technical capacity, which will be dis- paid by the agent, which would be the one benefitting cussed in Section 3.1.3 from the savings generated by the installation of RETs. On the other hand, the agent might consider it more Another important factor that might affect the com- convenient to pay for a service instead of investing in petitiveness of RETs in island tourism is the vulnerability infrastructure, which carries an upfront capital cost. of the island tourism sector to climate change impacts As a result, the different interests of the principals and (Contreras-Lisperguer & de Cuba, 2008). While it could agents create a roadblock to the greening of the sector be argued that on-site energy production increases (IEA, 2007).

32 Renewable Energy Opportunities for Island Tourism 3 .1.3 Institutional and technical capacity 2013a). In this respect, building capacity and involving (policy and knowledge gaps) utilities and local regulators in the policy design phase are essential, as shown by the case of Sicilian islands in The technical and human capacity necessary to design Italy. Despite strong potential for the use of renewable effective energy policies, as well as to install and man- energy, uncertainty about the applicability of landscape age RETs in tourism facilities, is still lacking in many protection laws and the hesitance of utilities (mostly island states. In particular, most of the higher education due to concerns in relation to feed-in tariffs) are limiting institutions in SIDS do not offer capacity building pro- the expansion of RETs. grams in the renewable energy field, thereby creating a gap between demand and supply of skills needed by the renewable energy market (IRENA, 2012f). In addition, 3.2 Enabling policies installations performed by unskilled personnel may lead to under-performance and failure of technologies, lead- The effective introduction of innovative technologies ing to misperception of the real benefits by hotel owners suggested in the previous sections requires that gov- (IRENA, 2013b). Several educational programs are being ernments, in collaboration with other key stakeholders implemented at the international and national levels to and local communities, create or reinforce a variety of fill the education and training gap in renewable energy. enabling conditions. As defined by UNEP, “enabling In particular, the IRENA Renewable Energy Learning conditions consist of national regulations, policies, sub- Partnership (IRELP) is offering support to countries for sidies and incentives, as well as international market improving access to renewable energy education and and legal infrastructure, trade and technical assistance” adapting education and training curricula. Also, specific (UNEP, 2011). training programs have been implemented, such as the global initiative on Vocational Training and Education As previously mentioned, there are four main ways to for Clean Energy, which includes a regional program to create the required conditions and stimulate invest- provide education for solar PV energy equipment and ments to promote the deployment of RETs: capital technology to up to 12 Pacific Island nations. investment; incentives and disincentives (such as tax reductions); public targets mandated by law; and insti- Concerning policies, the lack of clear regulatory and tutional and technical capacity building. Each of these policy instruments to encourage the purchase of power interventions has strengths and weaknesses. Given the generation technologies by public or private utilities variety of actors considered in the study, and the range represents another barrier to private investments in of challenges they face at the local level and within the RETs. Power Purchase Agreements, for example, are tourism sector, several policy interventions are present- essential to define all the legal and commercial aspects ed. These should not be perceived as confined to the for the sale of electricity between independent power tourism sector, as their outcomes would be felt across producers (IPPs) and utilities, and to improve mutual society, and will positively impact several development trust between the two parties. Moreover, only a lim- goals. ited number of island utilities have implemented net metering policies to encourage private investments Targets and mandates ensure that a given policy goal in grid-connected renewable energy systems (IRENA, will be reached, and allow the total cost to be borne

Text Box 8 – International cooperation on renewable energy in SIDS SIDS are actively engaged in global and regional platforms for sustainable tourism and renewable energy development. At the global level, the United Nations Programme of Action on the Sustainable Development of Small Island Developing States, commonly known as Barbados Program of Action (BPOA), represents the first strategic document for the transition towards sustainable economies in SIDS. The BPOA, approved in 1994 at the First Global Conference on the Sustainable Development of Small Island Developing States, encouraged the development and promotion of renewable energy sources and identified ecotourism as a key

Renewable Energy Opportunities for Island Tourism 33 opportunity for sustainable development. In 2005, the “Mauritius Strategy for the further implementation of the Programme of Action for the Sustainable Development of Small Island Developing States” (Mauritius Strategy) was endorsed by 129 countries, and is considered to be the continuation of the BPOA for 2005- 2015. The Mauritius Strategy reiterates the need for developing integrated energy programs, including the promotion and use of renewable energy, and encourages the international community and local stakeholders to invest in sustainable tourism.

In line with the Mauritius Strategy, various regional strategies and initiatives have been designed to promote low carbon growth in SIDS. In particular, regional organizations and associations such as CARICOM, the As- sociation of Caribbean States, the Indian Ocean Commission, the Secretariat of the Pacific Community (SPC), and the Pacific Islands Forum Secretariat have developed programs and initiatives to support the transition to more sustainable economic models, including in the tourism sector. Moreover, dedicated regional platforms for the promotion of tourism, such as the Caribbean Tourism Organization and the South Pacific Tourism Organization, are active in the promotion of sustainable tourism in island states.

In the Caribbean region, CARICOM has approved a Regional Energy Policy (2013), which aims to transform the energy sectors of Member States “through the provision of secure and sustainable supplies of energy in a manner which minimizes energy waste in all sectors, to ensure that all CARICOM citizens have access to modern, clean and reliable energy supplies at affordable and stable prices”. A Caribbean Sustainable Energy Roadmap and Strategy (C-SERMS) has been developed to accelerate the implementation phase of the Re- gional Energy Policy. C-SERMS highlights that “the tourism sector presents unique opportunities for rapid and significant impact because of its high energy consumption and enormous economic importance regionally”. In response to the need for technical advice and capacity building in the tourism sector, the Caribbean Hotel and Tourism Association established the Caribbean Alliance for Sustainable Tourism (CAST). Moreover, the Caribbean Hotel Energy Efficiency Action Programme (CHENACT) was designed to provide assistance to hotel owners for moving towards energy-efficiency improvements and renewable energy deployment.

In the Pacific egion,r the SPC and other regional stakeholders have developed a Framework for Action on Energy Security in the Pacific (FAESP), which was endorsed by regional leaders in 2010. The Implementa- tion Plan for Energy Security in the Pacific (IPESP) was subsequently developed to implement the provisions contained in the FAESP. In particular, the FAESP stresses the need for immediate action to enhance energy security in Pacific Island Countries and Territories, and highlights the challenges posed by “inadequate understanding of locally available renewable energy sources” (SPC, 2011). Further, in September 2013 the leaders of the Pacific Islands orumF signed the Majuro Declaration for Climate Leadership, a high-level declaration of commitment to a renewable energy transition, with specific targets indicated by each island country (Pacific Islands Forum, 2013). The Declaration captures the Pacific’s political commitment to be a region of Climate Leaders, and to spark a “new wave of climate leadership” that can deliver a safe climate future for all.

The Indian Ocean Commission launched the ISLANDS Project in 2011, which aims to accelerate the implementation of the Mauritius Strategy in the Eastern and Southern Africa –Indian Ocean region. The ISLANDS Projects, which supports the creation of a strategic program for sustainable development in the islands of the region and its active and coordinated use by all relevant stakeholders, gives central importance to energy security and the development of renewable sources of energy.

In addition to participating in regional and international platforms and initiatives on renewable energy development, several SIDS have developed national strategic documents for the improvement of energy sustainability across sectors, including tourism (see Annex III). In order to facilitate exchanges across countries and help islands accelerate their renewable energy uptake, IRENA has launched GREIN, a platform for pooling knowledge, sharing best practices, and seeking innovative solutions for the accelerated update of clean and cost-effective RETs on island states and territories.

34 Renewable Energy Opportunities for Island Tourism by households and the private sector for meeting the pany. On the other hand, the debt instruments confirm targets to be estimated. If savings are not sufficient, or if a permanent claim on the assets of the company (i.e., if access to financing is not available, incentives as well as debt payments cannot be made, the institution that did (public) capital investments support cost sharing across lend the funding can claim ownership of the assets of the key actors in the economy. On the other hand, the the company). provision of incentives will only be successful if there is buy-in from households and the private sector. Since 3 .2.2 Incentives and disincentives this cannot be forecasted, the cost to the government cannot be confidently estimated. As a result, creating a Public authorities can use incentives and disincen- comprehensive package would allow making the best tives – such as taxation and the granting, or removal, of of all the options analyzed, to reach stated goals while subsidies – to influence the market and to stimulate, or sharing and monitoring costs (UNEP, 2011). dissuade, private investments in keeping with policy objectives. In particular, instruments such as tax deduction for imports of RETs, feed-in tariffs, net metering policies 3.2.1 Capital investments and other forms of economic incentives might attract In the tourism sector the majority of currently installed new investments from private tourism companies will- renewable energy systems have been privately funded. ing to start green businesses, thereby playing a central While private investment in RETs can be profitable for role in the achievement of renewable energy targets and most island tourism facilities, the number of systems overall growth of island tourism economy. Given the vi- deployed has been limited due to certain financial and ability of RETs, which are often more economical than regulatory barriers. As such, it is important for the public other diesel-based options, incentives such as tax cuts sector to play a decisive role in directing private invest- should not be seen as interventions aimed at promoting ments towards renewable energy development, includ- technologies that are not economically viable. Instead, ing through targeted incentives and policy reforms that tax cuts would be primarily used to further shorten the facilitate access to credit and the development of inno- payback time of these investments, increasing instal- vative financial instruments for small private companies. lations and generating benefits that can be accrued within and beyond the tourism sector. Supporting in- Public policies consisting of capital investment include vestments would also help in situations where access to grants, the purchase of RETs, or alternatively the acqui- credit is limited and costly. sition of an equity stake in an RET project. As indicated by the World Economic Forum, “Public action to either Alternative incentive/disincentive options that could take an equity stake in projects or create attractive in- be implemented to facilitate access to RETs for tourism vestment conditions for potential equity providers can companies include: help raise additional capital through other financing mechanisms by absorbing potential losses to other fi- ●● Redirection of perverse subsidies. The removal nanciers” (WEF, 2013). As a result, equity acquisition by of perverse subsidies, such as harmful fossil fuels the public sector helps create more attractive conditions and electricity subsidies, could contribute to for other investors, reducing the risk of the investment, creating fiscal space in order to direct additional and reducing its cost. public financial resources towards the renewable energy market. Fossil fuel subsidies create The acquisition of equity can also be coupled with debt, market distortions and discourage private invest- or hybrid financing. The key characteristic of equity is ments in energy efficiency and renewable energy that it allows the holders of shares of a particular com- (UNEP, UNDESA and FAO, 2012). In particular, pany (or project) to have some special rights regarding existing subsidies provided to utility companies the operations of the company and management of its and tourism facilities for reducing the cost of assets. In other words, the shareholder of the company electricity generation and consumption create is entitled to play a role while making business decisions. harmful market distortions, which encourage the continuation of current fossil fuel import trends. Debt instruments instead do not provide the right to Public resources used to subsidise fossil fuels take part in the management of the particular com- could be redirected towards the development of

Renewable Energy Opportunities for Island Tourism 35 the renewable energy market, especially to sup- how the system is used. For a wind system, the port upfront investments in renewable energy credit is 20% of the cost up to a maximum credit infrastructure, as well as capacity building and of USD 1,500.13 research and development programs on specific ● ● Tax rebate. A reduction in taxes on the purchase RETs in different island contexts. In this respect, of RET is an effective instrument to drive private redirecting subsidies from fossil fuels to RETs investments. This measure might be particularly may support utilities in adapting to a new busi- important in the case of imported technologies, ness model, designed to support decentralisation where high transport costs require a significant of supply and the management of a more diversi- upfront investment by tourism companies. Pub- fied energy supply mix. lic revenue losses could be compensated by an ●● Access to credit for tourism business. The col- increase in taxes on fossil fuel imports, and use. laboration between credit institutions and public Tax reliefs are already implemented in many is- authorities is essential to facilitate access to lands. For example, the government of Barbados credit for tourism companies willing to invest in introduced an exemption from import duties RETs. In order to secure financing streams and and environmental levy for various RETs such as overcome financial barriers for the achievement wind turbines, PV components and systems, bio- of renewable energy targets, a combination of fuel systems, hydropower systems, solar thermal private debt (e.g., preferential loans from banks systems, wave or tidal power systems, fuel cell to the tourism businesses) and public debt (e.g., systems and geothermal heat pump systems.14 raised through the issuing of public bonds for Similarly, tax exemptions applicable to renew- the expansion of the electric grid) might be a able energy equipment have been introduced by suitable option in some cases. Also, microfinance the government of Mauritius, together with the could be used as an effective instrument for the exemption of the Land Conversion Tax on power financing of small tourism businesses, especially stations for renewable energy (Deloitte, 2012). in SIDS (REN21, 2013). For example, the Austral- ●● Feed-in tariffs. An increasingly common regula- ian government has introduced a Renewable En- tory instrument used by governments to boost ergy Loan Scheme – including low-interest loans renewable energy development is the setting under a USD 30 million Renewable Energy Loan of a guaranteed price over a fixed-term period Fund and associated top-up grants (capped at when renewable electricity can be sold to the USD 100,000) – to assist businesses with the electricity network. With this policy instrument, purchase and installation of renewable energy tourism businesses willing to generate their own generation facilities or manufacture in the island energy supply might have an additional incentive of Tasmania.12 for selling surplus electricity to the national grid. ● ● Tax credit. An annual income tax credit can be Globally, 65 governments had already introduced provided to hotel owners that invest in RETs. feed-in tariffs by early 2012 (REN21, 2013). Also The amount of money would be proportionate islands are increasingly using this regulatory in- to the investment made in the tourism facility, or strument to encourage private investments. For to the amount of clean energy produced annu- example, the British Overseas Territory of the ally (Mitchell, et al., 2011). In Hawaii, for example, Cayman Islands has approved a pilot feed-in tar- a Renewable Energy Technologies Income Tax iff for utility-customer-sited renewable genera- Credit is provided under article 235-12.5 of the tion of less than 50kW (Shirley & Kammen, 2013). Hawaii Revised Statutes. Under this provision, ● ● Net metering. A net metering policy consists of individuals, hotels and resorts that install an SWH an electricity payment scheme under which the system, solar PV system or wind energy system electricity generated by building owners (e.g., can claim a credit for a portion of the cost. For a hotels with on-grid solar PV systems) and deliv- solar energy system, the credit is 35% of the cost, up to a certain maximum amount depending on 13 http://tax.hawaii.gov/geninfo/renewable/ 14 http://www.bidc.com/index.php?option=com_content&view 12 http://www.development.tas.gov.au/economic/funding/loans/ =article&id=145:green-business-incentives&catid=87:news- Industry_funding_programs/renewable_energy_loan_scheme archives&Itemid=167

36 Renewable Energy Opportunities for Island Tourism ered to a distribution utility can be used to offset have an appropriate legislative framework to regulate the cost of electric energy provided by the utility the energy sector (UNEP, UNDESA and FAO, 2012). to the building owner during the applicable bill- In this sense, the introduction of regulatory instruments, ing period. Since the LCOE from renewable ener- and their combination with incentive measures, can gy sources is lower than electricity tariffs in most drive the renewable energy transition in island tourism. islands, net metering policies can be extremely effective in encouraging private investments in Possible regulatory frameworks that could be intro- renewable energy deployment. GRENELEC, the duced in on islands to institutionalise renewable energy public utility company of Grenada, has success- targets and accelerate the transition to the adoption of fully implemented a one-to-one net metering RETs in the tourism sector include: plan. This policy allows grid connection of IPPs with the public utility, and buy-back rates for en- ●● Mandatory targets/quota obligations. Govern- ergy generated at a one-to-one ratio. The same ments and local authorities can decide to in- policy option has been adopted on the island of troduce mandatory national renewable energy Palau since the approval of the Palau Net Meter- targets. However, it is important that their work ing Act (2012), which requires electricity service is coordinated, to avoid the creation of an uncer- providers to offset charges for electricity by the tain policy environment. Based on the definition amount of electricity supplied by the customer of a realistic target, possibly decided after wide from its own energy-powered generation sys- stakeholder consultations and assessment stud- tem.15 ies, specific quota obligations can be imposed ●● Variable/accelerated depreciation. This meas- on key economic sectors, including tourism. Most ure consists of a reduction in income tax bur- SIDS have already set renewable energy targets den in the first years of operation of renewable (e.g., Mauritius: 35% by 2025; Palau: 20% by energy equipment (Mitchell, et al., 2011). It has 2020; Saint Vincent and Grenadines: 60% by the objective of reducing the investment costs 2020). As previously mentioned, in September of renewable energy generation in tourism fa- 2013, the leaders of the Pacific Islands Forum cilities, gradually phasing out the incentives as signed the Majuro Declaration for Climate Lead- investments are repaid by lower electricity costs ership, a high-level declaration of commitment and overall added benefits and avoided costs to a renewable energy transition, with specific deriving from RETs. An example of the suc- targets indicated by each island country. The cessful introduction of this policy instrument is introduction of quota obligations and associated the Accelerated Depreciation for Investments incentive schemes could be required to achieve with Environmental Benefits (Depreciación Acel- the national renewable energy targets within erada para Inversiones que Reportan Beneficios the aggressive timeframes set by many island Ambientales), a law approved by the Mexican governments. Congress to favour new investments in renew- ●● Emission limits. As an alternative to setting able energy. Under this regime, companies that quotas for renewable energy generation, govern- invest in RETs may deduct up to 100% of the total ments might introduce mandatory emission lim- investment in a single year (Davis, Houdashelt, & its for tourism facilities. Such regulations would Helme, 2012). require hotels, resorts and other facilities to report periodically on their energy use, and relative emission levels, thereby encouraging the adop- 3.2.3 Public targets mandated by law tion of energy efficiency and RETs and associated The implementation of specific rules and the enactment practices. of mandates on renewable energy targets ensure that ●● Standards and guidelines. The development of the stated goals are reached and expenditures are kept standards and guidelines for connecting IPPs to under control. Only a limited number of island countries the national grid is key to increase confidence among hotel owners willing to invest in grid-tied

15 http://pidp.eastwestcenter.org/pireport/2012/January/01-10-13. renewable energy systems. Since many islands htm still lag in the establishment of clear procedures

Renewable Energy Opportunities for Island Tourism 37 and regulations for effective grid connection, po- as well as to facilitate the implementation of such tential investors might feel at risk and decide not provisions. In particular, many SIDS do not have to undertake investments in renewable energy a coordinating agency for renewable energy projects. deployment. Also, slow and complex bureaucratic procedures prevent the prompt implementation of incentive schemes and other policy 3 .2.4 Institutional and technical capacity measures. Therefore, capacity-building programs building for governmental agencies and institutions on The success of renewable energy deployment is strong- renewable energy innovation should be priori- ly linked to the creation of an environment conducive tised, focusing in particular on relevant skills for: to the concrete implementation of high-level policies designing effective and customised policies, es- and plans. To achieve this, it is necessary to develop pecially by adopting a systemic approach to domestic skills at different levels, including institutional identify cross-sectoral synergies; attracting for- capacity (e.g., for policymaking), technical skills (e.g., for eign direct investments; and coordinating official renewable energy assessments, installation and main- development assistance flows. tenance of technologies), and capacity of civil society, ●● International cooperation. SIDS have already including individuals and local organisations (e.g., for established a number of international and re- participation in open policy processes). The following gional cooperation mechanisms and institutions capacity-building domains and initiatives might be con- to support renewable energy deployment (e.g., sidered for boosting renewable energy deployment in SIDS DOCK). Several international organisations island tourism: and non-governmental organisations have start- ed dedicated projects in support of sustainable ●● Technical capacity. Many islands still lack edu- development in small island states (e.g., Global cational programs and specialised training in Sustainable Energy Islands Initiatives). IRENA has RETs. In order to exploit the employment gen- launched GREIN, a platform for island stakehold- eration potential of the renewables sector, train- ers that seeks to facilitate the sharing of knowl- ing courses should be developed at different edge and best practices for accelerated uptake educational levels, from high school to university. of RETs in island countries and territories.17 Such Also, tourism facilities should be encouraged organisations and initiatives should be further to provide adequate training to their personnel strengthened in order to enhance the coopera- before introducing RETs. Tourism bodies like tion between islands at regional and global scales hotel associations should also be involved in the for sharing best practices, standards and lessons capacity-building efforts on renewable energy, learned on private-public collaboration for sus- as they can convey the information effectively tainable tourism development. to their members. An example of a capacity- building program on renewable energy is IRELP, which aims to improve access to specialised 3 .3 Review of best practices training courses on RET installation, operation, maintenance, etc.16 Moreover, IRENA provides Several policies and initiatives have been already imple- technical capacity-building programs on a varie- mented in islands to support the deployment of RETs ty of topics, including resource assessments, data in tourism facilities. The impact of policy interventions collection and harmonisation, renewable energy largely depends on the barrier(s) addressed, the type planning, policy and regulatory frameworks, and of technology supported as well as the specific island financing (IRENA, 2012f). context. ●● Institutional capacity. The development of institutional capacities is key to ensure the correct design of renewable energy policies and targets,

17 https://www.irena.org/DocumentDownloads/Publications/ 16 http://www.irena.org/menu/index.aspx?mnu=Subcat&PriMenuID= Global%20Renewable%20Energy%20Islands%20Network%20 35&atID=110&SubcatID=156&RefID=156&SubID=161&MenuType=Q brochure.pdf

38 Renewable Energy Opportunities for Island Tourism Four best practices are presented based on their capac- has contributed to the success of GRENSOL, which is ity to overcome the barriers identified: now a leading solar PV company in the Eastern Carib- bean. In 2009, only two years after the implementation (1) Net metering policies and variable-accelerated of the net metering policy, GRENSOL had installed 25 depreciation, to address the competitiveness of grid-tied systems on the island of Grenada (Shirley & RET options; Kammen, 2013). (2) Leasing schemes and low-interest loans for the purchase of RETs, to provide a solution to access Another example of successful net metering policy to capital and the cost of financing; is the one implemented by the Cook Islands (IRENA, (3) Power Purchase Agreements, to tackle techni- 2013a) and the Virgin Islands Water and Power Author- cal capacity gaps, access to capital and cost of ity. In 2007, the U.S. Virgin Islands Public Services Com- financing; and mission approved a limited net metering program for (4) Awareness raising and training programs, to fill residential and commercial PV, wind-energy or other institutional and technical capacity gaps. renewable energy system up to 10 kW in capacity. In light of the success of this policy, including for the hotel 3 .3.1 Best practice: net metering policies sector, a new legislature passed in 2009 that raised capacity limits for commercial activities up to 100 kW. and variable-accelerated depreciation In 2013, the program had 285 customers, most of whom The most effective way to encourage and accelerate had systems operating at below 10 kW, according to renewable energy deployment in island tourism is to the Water and Power Authority.18 Net metering, among create the enabling conditions for hotel owners to others, represents an important incentive for private rapidly recuperate their upfront investments. The im- investments in grid-connected installations. plementation of incentive policies such as net metering and variable-accelerated depreciation is very effective 3 .3.2 Best practice: leasing schemes and in triggering private investments, especially considering low-interest loans for the purchase of that the LCOE from renewable energy sources is lower RETs than electricity tariffs in most islands. On the other hand, variable-accelerated depreciation is effective in Island tourism operators willing to invest in RETs are reducing the initial investment burden of hotel owners. often constrained by difficulties in obtaining access In this context, the incentive is gradually phased out as to credit from commercial banks at a rate that would investments are repaid by lower electricity costs. make the investment pay back in a reasonable time. An effective approach to overcome this barrier is the Context: Net metering policies are particularly suited provision of leasing schemes and low-interest loans for islands where the cost of electricity from utilities is targeting the purchase of RETs. Leasing schemes allow higher than the cost of electricity generation from in- tourism businesses to lease renewable energy systems dependent renewable sources. This is the case in most (e.g., solar PV) from a private provider. Users can opt island contexts, and especially in SIDS and remote island for a “pre-paid” lease with an upfront payment for the countries and territories. Variable-accelerated deprecia- entire lease, a “partial-pay” lease with an initial payment tion is especially suited for the owners of large hotels, as and monthly payments over the contract period, or a they would benefit from a reduction in annual income “month to month” lease with the price of the lease be- taxes. On the other hand, this intervention would lower ing paid on a monthly basis, without upfront payments. government revenues in the short term, with possible At the end of the lease period, the customer can decide increases (especially if profits for hotels increase due to to remove the system, to purchase it, or to enter into a lower costs) in the medium and longer terms. new lease. Preferential loans are also very effective in encouraging private investments in renewable energy. Case study: The Grenada Solar Power Ltd (GRENSOL) was founded in 2005 with the aim to promote the use of solar energy on islands. Since 2007, the company has implemented a 1:1 metering policy at retail rates for 18 http://virginislandsdailynews.com/news/wapa-eliminates-require- systems less than 10kW. The introduction of this policy ment-for-net-metering-1.1462067

Renewable Energy Opportunities for Island Tourism 39 Context: Leasing schemes are particularly useful for 3 .3.3 Best practice: Power Purchase small hotels that have limited financial resources and are Agreements interested in assessing the real economic returns deriving from the installation of RETs. Third-party financing Similar to leasing models, partnerships can be created is also effective at overcoming the barriers posed by between power sector companies and hotels to share the principal-agent problem common to many island responsibilities related to the purchase, installation and tourism facilities (see section 3.1.2). The pre-defined maintenance of RETs and their use. In this case the time period associated with leasing models encourages ownership of the system resides with the power sector hotel managers to install RETs in their facilities, so as to company, which partly overcomes the problems related fully appreciate the economic advantages of renewable to financing for upfront investment since the company energy for the duration of their management period, can work at cost, rather than market price. Hotel agents without having to negotiate with hotel owners on the can therefore harness the benefits of renewable energy purchase of the technologies. Low-interest loans in- technologies upon the signature of a Power Purchase stead are a proven and effective instrument in all island Agreement that sets a fixed-lease period (normally sev- and tourism contexts, as they reduce the burden of eral years) and rate for the electricity purchased, with- financing costs and allow tourism businesses to pay out being responsible for installation and maintenance. back the loan using the economic returns deriving from reduced electricity costs. Context: The high cost of diesel-based electricity on many islands allows for a positive return on investment Case study: The private company Sunetric, based in for the developer and reduced energy costs for the Hawaii, offers leasing schemes for solar PV systems to hotel. As with a conventional lease, at the end of the households and businesses. The leasing scheme, which term hotel agents may decide to uninstall the renewable includes system installation, maintenance and insur- energy system, upgrade to a newer model or, when al- ance, is provided at low monthly payments with a zero lowed by the leasing company, purchase the system at down payment option, and with flexible end-of-lease a reduced rate. options, including the possibility of further expanding the system. Thanks to the flexibility of its leasing Case study: In 2013 Starwood Hotels & Resorts World- scheme, Sunetric has provided 40% of the net-metered wide announced the establishment of a global partner- PV installations in Hawaii, including to tourism facilities. ship with NRG Energy, a leading power sector company Sunetric has installed a 1.2 MW roof-mount PV system at the global level. The agreement will begin with NRG at the Wyndham Kona Coast Resort, and a 200 kW building and operating a 1.3 MW solar PV system at roof-mount system at the Kukui Plaza Apartments and Westin Saint John Resort & Villas in the U.S. Virgin Is- Condos.19 lands. NRG will own the solar arrays while Starwood will be the enabling partner through a multi-year agreement On Prince Edward Island, the company Solar Island Elec- to purchase electricity from the solar arrays.21 This global tric Inc. offers the ability to lease solar panels. The com- partnership was announced during the 2013 Caribbean pany estimated that the savings realised on customers’ Summit of Political and Business Leaders as a way to electricity bills are higher than the lease payments for reduce the negative economic impacts of high diesel- solar panels. As a result, several customers have demon- based electricity costs on Caribbean tourism, and it will strated interest in this leasing program, as it eliminates apply to other Starwood properties located in Arizona the upfront installation costs.20 and Hawaii. This innovative type of purchasing agreement helps to overcome the limitations in relation to access to affordable financing, policy and knowledge gaps, especially in the case of the principal-agent problem.

19 http://sunetric.com/press/post/sunetric-makes-sunpower-lease- available-in-hawaii/ 21 http://development.starwoodhotels.com/news/2/577starwood_ 20 http://www.theguardian.pe.ca/Business/2014-01-20/article- hotels_resorts_and_nrg_energy_introduce_an_industry-leading_ 3583256/Affordable-option-for-solar-energy/1 alliance_to_develop_solar_power_at_hotel_properties

40 Renewable Energy Opportunities for Island Tourism 3 .3.4 Best practice: awareness raising and Education and certification of local blacksmiths and training programs for institutional and plumbing and heating service providers, so that they technical capacity could install renewable energy equipment and systems;

Devising awareness-raising and capacity-building strat- ●● Energy exhibition in 1998, where RE was pre- egies is an effective method to overcome the skepticism sented; of tourism operators with regard to renewable energy. ●● Personalised approaches and advice in the form Awareness campaigns should focus on the economic of calls by energy advisors, who evaluated the benefits to the island tourism businesses from the de- insulation and energy solutions of buildings and ployment of RETs. Capacity-building activities should gave recommendations; and provide skills to both decision-makers (e.g., for creating ●● Demonstration of alternative materials for in- the enabling policy conditions), tourism operators (e.g., sulation, which included insulation of selected to develop renewable energy deployment strategies buildings and presenting the results to interested and investment plans), as well as technical workers (e.g., parties. for increasing the number of specialised workers in the ●● Another example of awareness-raising activity renewable energy sector). on renewable energy and energy efficiency is the series of training workshops and audits in Context: All island contexts and tourism operators are energy management conducted in 2004 in Saint potential targets of capacity-building and awareness- Lucia, and directed to island tourism stakehold- raising activities. The specific focus of each campaign ers. The initiative, which was supported by the and training program would need to be adapted to local Ministry of Physical Development, Environment specificities. In some island contexts tourism operators and Housing, and funded by the Climate Change are fully aware of the benefits deriving from the shift Development Fund of the Canadian International to renewable energy, but they might lack the technical Development Agency, brought together hoteling skills to plan for renewable energy deployment. In other stakeholder groups with an interest in energy cases, tourism operators might be reluctant to invest in management to share ideas and experiences, renewable energy, as they erroneously perceive fossil thereby disseminating knowledge on the cost fuel as the safest and most convenient energy source. and benefits of available technologies (Lewis Also, the owners of small hotels might consider the shift Engineering Inc., 2004). to renewable energy as an unnecessary investment, considering their lower annual business volume. Finally, Table 8 summarises the main barriers to RET deploy- hotel managers might be afraid of investing in RETs ment in island tourism, the relevant policy options to when they do not own the hotel. For each of these con- overcome these barriers, and selected best practices. texts, targeted interventions can be designed, all having This table provides only an overview of barriers and the final goal of showing the multiple advantages and policy options, with the understanding that each island expected returns of a renewable energy transition. tourism context requires a more detailed and customised analysis. Case Study: Samsø is a small Danish island whose two main economic activities are farming and tourism. The island was able to convert all of its energy supply to renewable energy within ten years, from 1997 to 2007, thanks to the successful implementation of the Samsø Renewable Energy Island Project. Initially, local people (including tourism operators) were reluctant to invest in RETs. To address this barrier, project leaders generated awareness among households and private actors by conducting several campaigns to give knowledge and practical abilities to save energy and become ac- quainted with RETs. The intervention methods included (Saastamoinen, 2009):

Renewable Energy Opportunities for Island Tourism 41 * * y building for y building for y building for capacity building capacity wareness raising wareness tandards and guide- tandards T and techni- institutional cal capacity lending institutions to to lending institutions the risks assess properly RET financing to related of RETs, local installers risks of under- reduce to due to performance poor installation S lines Capacit Capacit A ● for programs raining ● ● ● ● Institutional and technical and technical Institutional ● ● ● ● ● sions quotas sions limits Public targets Public targets enewable Energy Energy enewable mandated by law by mandated Emis Emis R Standards ● ● ● ● ● ● * * * Effective Policy Solutions Policy Effective y supplementation to develop policies and develop to y supplementation * disincentives Incentives and Incentives t metering eed-in tariffs Ne V depreciation P ments T F Pr loans interest F Capacit energy, of renewable the promotion for regulations a and create tourism applicable to are ensuring they sector for the private field playing level ● ● ariable-accelerated ● Agree- Purchase ower ● and rebates ax credits ● ● and low eferential ● eed-in tariffs ● ● ● ● ● ● ● ● ● ants * * by island context, hotel ownership and technology option and technology ownership hotel island context, by Capital investments Capital easing schemes easing schemes Pur Capital subsidies or gr L L ● chase of RET ● ● ● ● ● ● ● . 3 .

Table 8. Renewable energy deployment in island tourism: main barriers, intervention options and relevant case studies studies case and relevant options main barriers, intervention in island tourism: deployment energy 8. Renewable Table financing

Competitiveness of RE options Competitiveness and economic (technical barriers) Access to capital and to Access of cost (ownership and f (ownership inancial barriers) and Institutional capacity technical gaps) and knowledge (policy Barriers ased on analysis of data from DNV GL (2014) from of data ased on analysis * Best practices presented in Section 3 in Section presented practices * Best B

42 Renewable Energy Opportunities for Island Tourism 4 MODELING THE OUTCOMES OF RET ADOPTION IN ISLAND TOURISM

The interconnections between socio-economic devel- SAC (30%) and SWAC (70%) systems; water heating will opment and the environment have become more visible be supplied by SWH; and other electricity needs by PV. over the past decade. This has urged policy makers in islands to improve the policy-making process to explic- Boundaries: Variables that are considered an essential itly consider climate change and the impact of other part of relevant development mechanisms are endog- external shocks (such as the volatility of oil prices) to enously calculated. For example, GDP and its main de- find durable solutions. In this context, the analysis of terminants, electricity demand and supply, as well as re- historical data and future scenarios is crucial to inform lated generation cost and emissions are endogenously decision-makers on the strengths and weaknesses, as determined. Variables that have an important influence well as synergies and bottlenecks, of possible renewable on the issues analyzed, but which are only weakly influ- energy intervention. enced by the issues analyzed, such as population, are exogenously represented. A simple quantitative simulation model was developed specifically to provide quantitative support to this re- Granularity: The model is customised to represent port to illustrate the several contributions that RETs a sample small island national setting. Data are can provide in the tourism sector and at the national aggregated at such level, with no spatial disaggregation. level in islands. This model integrates the main pillars of Data assumptions include an initial GDP per capita sustainable development and allows the performance of of USD 10,000 per person per year; initial electricity several indicators – social, economic and environmental demand of 2,000 kWh per person per year; and the – to be evaluated. following consumption of electricity in the tourism sector: 48.2% for air conditioning, 5.5% for how water The approach proposed uses the System Dynamics and the remaining 46.3% for other services. methodology as its foundation, serving primarily as a knowledge integrator. System Dynamics in fact allows Time horizon: The model is built to analyze medium- to stocks and flows of human, built and natural capital to long-term scenarios. The simulation starts in 2000 (for be represented explicitly, and for linkages among them validation purposes) and ends in 2035. to be created through the use of feedbacks, delays and non-linearity. Structure and main indicators: The model includes several feedback loops, with the most important representing the link between energy and economy (see 4.1 Model specifications Figure 19). More specifically, GDP in the model influences electricity demand, which can be satisfied us- The model is customised to an ideal island, representa- ing diesel generators or renewable energy. Electricity tive of a generic small island context, considering an supply is estimated by technology, considering specific initial total population of 100,000 and GDP per capita capacity factors. The energy mix determines the aver- of USD 10,000. Further, it is assumed that the electric- age electricity generation cost and the electricity bill ity consumed by the tourism sector is about 10% of (consumption times cost per kWh). The electricity bill the total and that only diesel generators are used in is then compared to GDP (as a ratio) to assess the inci- the Business As Usual (BAU) case. In the RET scenario dence of energy costs on economic activity: when the instead it is assumed that during the next ten years all energy bill to GDP ratio increases, productivity declines; the needs of air conditioning and water heating, as well when the ratio becomes lower, productivity increases. as 50% of other electricity consumption, will be supplied Productivity, together with capital (driven by invest- by RETs. Specifically, air conditioning will be provided by ments, also affected by GDP) and employment (also

Renewable Energy Opportunities for Island Tourism 43 Figure 19: Causal Loop Diagram (CLD) representing the main feedback loops and indicators included in the model

investment + capital + R + + employment gdp +

+ productivity energy demand

R + + ret diesel-based energy price + - investment investment ret generation cost + + + ret energy B + diesel price supply ret generation capacity - + diesel based + diesel generation ghg emissions energy supply + capacity

driven by investment, including in renewable energy), to construction of capacity (measured in kW). Electricity have an impact on GDP, closing the feedback loop. generation considers a given capacity factor and LCOE for the four RETs considered (set at USD 0.262/kWh for The main outputs of the model include power capacity, PV, USD 0.113/kWh for SAC, USD 0.055/kWh for SWAC generation and the investment required to meet the de- and USD 0.042/kWh for SWH). sired capacity target (e.g., 100% of diesel generators for air conditioning), and the resulting added benefits and Investments, avoided costs and added benefits are then avoided costs. Among the benefits, indicators include compared to estimate the annual impact on energy- GDP, direct employment creation (for construction and related expenditure for the tourism sector, as well as O&M) and relative income generated. Avoided costs the break-even point, and the return on investment for include savings from avoided consumption (e.g., diesel, the expansion of electricity generation from renewable through the use of renewable energy). These indicators energy. are estimated starting from a desired expansion of the use of renewable energy for power generation. This tar- Figure 19 presents the main feedback loops and indi- get leads to estimation of the investment required and cators included in the model, in a highly summarised

44 Renewable Energy Opportunities for Island Tourism Figure20: Avoided energy bill minus investment annual (million USD/year) and cumulative (million USD)

90 90 80 80 70 70 60 60 50 50 40 40 30 30 Million USD

Million USD/Year 20 20 10 10 0 0 -10 -10 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Net result (RET vs. BAU) Cumulative net result (RET vs. BAU)

Causal Loop Diagram (CLD).22 The CLD indicates that 4 .2 Main results the use of RETs allows to turn a Balancing Loop (B) (originating from the use of more and more expen- The expansion of electricity generation from renewable sive diesel-based energy generation) into a Reinforc- energy in islands is expected to lead to the installation ing Loop (R) (in which the use of RETs allows energy of 10.8 MW by 2025 and 14 MW by 2035. This requires a costs to be lowered, and productivity and GDP to be total (cumulative) investment of USD 20 million by 2025 increased). and USD 26 million by 2035 and represents approximately 70% of tourism power consumption. Scenarios: Two main scenarios were simulated and analyzed. This investment will increase electricity generation from renewables, reducing the use of diesel generators as ●● A Business as Usual (BAU) case that assumes well as lowering the corresponding capital investment the continuation of historical and present trends, required to expand capacity in the years to come. In including the reliance on diesel for electricity fact, as a result of the use of renewables, and displace- generation. ment of increasingly expensive diesel power generation, ●● A Renewable Energy Technology (RET) scenario the average cost of electricity is projected to decline by that simulates a penetration target of 100% for approximately 50% in 2025 and 60% by 2035 for the renewables regarding air conditioning and water tourism sector. This leads to a decline in the energy bill heating, and 50% for other electricity use by and an increase in profits for the tourism sector, freeing 2025. up resources for other investments (and also improving the balance of payments of the country due to reduced 22 How to read a causal diagram: CLDs include variables and arrows fuel imports). Considering the investment required to (called causal links), with the latter linking the variables together expand renewable energy capacity and the cost of with a sign (either + or −) on each link, indicating a positive or negative causal relation: energy production, it is estimated that the average • A causal link from variable A to variable B is positive if a change in payback time is approximately four to five (considering A produces a change in B in the same direction • A causal link from variable A to variable B is negative if a change in all RETs). In addition, the savings that will be accrued A produces a change in B in the opposite direction over time (comparing the energy bill in the BAU and

Renewable Energy Opportunities for Island Tourism 45 RET scenarios), amounting to approximately 50% of of over USD 20 million in 2025 alone. This amount is the BAU annual electricity bill in 2025, reach up to 1% of projected to increase beyond 2025, as the price of diesel GDP in 2035. is expected to increase while the generation cost from RETs remains constant. Figure21 shows the difference between the investment (extra cost incurred to install RETs) and the avoided Further, the simulations indicate that the investment energy bill resulting from this investment (estimated as in renewable energy will not only (1) reduce electricity the BAU minus RET energy bill of the tourism sector). generation costs, (2) lower the electricity bill and (3) As a result, this figure indicates the net impact on the stimulate the economy by increasing GDP relative to financial resources of the sector, considering annual BAU. In fact, the use of renewable energy is projected to flows and their cumulative value. In particular, the figure (4) lower emissions from power generation by over 70% indicates that the investment in RETs, reaching a total by 2035 (or 7% at the national level), and (5) create new of USD 20 million, will generate cumulative savings of local jobs (for the installation and O&M of renewable over USD 80 million by 2025, or a positive annual flow energy power generation capacity).

46 Renewable Energy Opportunities for Island Tourism 5 RELEVANT CASE STUDIES

Four relevant case studies are presented in this section nesia and Greece) and focus on best practices adopted to showcase the effectiveness of RET deployment in by hotels for the deployment of SWH, SWAC, PV and island tourism. The case studies were selected based on SAC systems. geographic representation (Barbados, Fiji, French Poly- 5 .1 Turtle Beach Resort, Barbados

Summary of Turtle Beach Resort Case Study Hotel name, location and size Turtle Beach Resort. Located at Dover, on the southern coast of Barbados. It has 167 suites.

Context and challenges Prior to 1997, hot water was produced entirely from electric water heating systems powered with diesel- generated electricity. However, electricity in Barbados is very expensive due to the high cost of fossil fuel imports, amounting to about USD 0.278/kWh in 2013 (electricity tariffs grew by 40% from 1997 to 2013). In addition, the price of electricity is extremely volatile due to the Fuel Clause Adjustment mechanism, through which the Public Utilities Board allows utility companies to adjust the electricity tariff as the international price of fossil fuels rises and falls.

RET installed In 1997, the management of the Turtle Beach Resort decided to explore alternative solutions to supply hot water to hotel rooms and facilities, and invest in anSWH system. The total capacity is 7,800 gallons (40 gallons of water per room plus 1,120 gallons for ancillary services). The system heats water up to 55-60°C and produces energy equivalent to 1,048 kWh every day.

Investment and financing ●● Capital investment: USD 200,000 ●● Maintenance costs: USD 6,250 per year ●● Policy support: 35% tax credit provided by the government of French Polynesia

Economic benefits ●● Payback period: about eight years, from 1997 and 2004 (about one year when considering 2013 electricity prices) ●● Energy savings: USD 1.48 million between 1997 and 2013

Other benefits

●● Carbon emissions avoided: 655 tCO2 between 1997 and 2013 (41 tons per year) Lessons learned Investing in SWH technology makes business sense for island hotels, especially when electricity tariffs are high due to expensive fuel imports.The capital investment and maintenance costs of a SWH system are lower than the financial returns deriving from avoided electricity costs over the lifetime of the technology.

Renewable Energy Opportunities for Island Tourism 47 5 .2 Intercontinental Bora Bora Resort & Thalasso Spa

Summary of Intercontinental Bora Bora Resort & Thalasso Spa Case Study Hotel name, location and size Intercontinental Bora Bora Resort & Thalasso Spa. Located on the island of Bora Bora, French Polynesia. The resort has 83 large villas.

Context and challenges Electricity prices of about USD 0.48 per kWh represented a challenge for hotel profitability, especially considering the significant demand for air conditioning in Bora Bora. Based on these considerations, the management decided to carry out a cost-benefit analysis to identify the most convenient RET options to replace fossil fuel consumption.

RET installed A SWAC system was installed, consisting of a 2,000 metre long pipeline extracting seawater from a depth of 900 metres. The system uses a 13 kW pump for transferring water to a thermal exchanger. The heat exchanger is made of corrosion-resistant titanium. A 13 kW pump is used to transfer the water for 50 metres from the shore to a heat exchanger that is used to cool a separate freshwater circuit, while keeping corrosive sea water away from the air conditioning system. Finally, the cooled freshwater is used to supply 450 tons (or 1.6 MW) of air conditioning to the rooms and facilities of the whole resort, while warmer seawater is returned to the ocean at a depth of 40 metres, to avoid impacts on ecosystems due to the difference in temperature with surrounding sea water.

Investment and financing ●● Capital investment: USD 7.9 million ●● Maintenance costs: very low, due to the use of corrosion-resistant titanium heat exchangers ●● Policy support: 35% tax credit provided by the government of French Polynesia

Economic benefits ●● Payback period: 11 years ●● Energy savings: 2.5 million litres of diesel fuel every year (90% of total consumption), corresponding to annual energy savings of USD 720,000

Other benefits

●● Carbon emissions avoided: 2,500 tCO2 every year Branding: – First hotel in the southern hemisphere offering thalassotherapy, thus exploiting the benefits of nutrient-rich water extracted from deep sea – The desalinated deep sea water, which contains a complement of mineral salts, will be bottled under the label “Vai Moana” right at the Spa

Lessons learned ●● Although they require high upfront investment cost, SWAC systems offer positive returns for large hotels located at short distance from the sea. ●● The payback period of SWAC systems is relatively short for hotels in tropical islands, where air conditioning is consumed all day throughout the year.Incentive policies, such as tax credit from the government, can play a significant role in encouraging private investment in SWAC systems.

48 Renewable Energy Opportunities for Island Tourism 5.3 Turtle Island Resort, Fiji

Summary of Turtle Island Resort Case Study Hotel name, location and size

Turtle Island Resort. Located on Turtle Island, 50 miles northwest of Fiji’s main island, Viti Levu, in the group of the Yasawa islands. It has 14 cottages, and accommodates a maximum of 28 people.

Context and challenges Mr. Richard Evanson purchased Turtle Island in 1972 and opened the Turtle Island Resort in 1980. Respect for local communities, biodiversity and ecosystems has always been the core value of Mr. Evanson’s tourism development strategy. Since the Yasawa chain is not connected to the national grid run by the Fiji Electric- ity Authority, each island has to produce electricity from generators powered with costly imported diesel. In response to this challenge, Mr. Evanson launched the Solar Water Project, a solar PV investment project to exploit the abundant solar radiation for electricity generation, eventually making Turtle Island completely independent from imported fossil fuels. The Solar Water Project was launched in 2012 and completed in 2013.

RET installed A solar PV system was installed with total capacity of 240 kW and battery storage. The system was installed by Clay Energy in 2013 and is composed of 968 solar panels that produce 1.2 MWh per day, providing 100% of the island’s power needs. It is the largest off-grid solar PV installation in the South Pacific for a resort, and it made the Turtle Beach Resort one of the first clean energy resorts in the world.

Investment and financing ● Capital investment: USD 1�5 million

Economic benefits ● Payback period: eight years ● Energy savings: diesel consumption for electricity generation reduced by 85,000 litres per year, corresponding to annual savings of USD 250,000

Other benefits

●● Carbon emissions avoided: 220 tCO2e per year Lessons learned ●● Producing electricity through off-grid solar PV systems has a short payback time in islands with good solar radiation and high price of diesel. ●● Battery storage allows solar electricity to be used when the sun is not shining, including at night. ●● Hotels and resorts on islands can generate their entire electricity needs from off-grid solar PV systems, improving energy security and obtaining considerable economic and reputational benefits.

Renewable Energy Opportunities for Island Tourism 49 5 .4 Rethymno Village Hotel, Crete

Summary of Rethymno Village Hotel Case Study Hotel name, location and size Rethymno Village Hotel. Located on the island of Crete, in northern Greece. It has 110 rooms and hosts up to 260 guests.

Context and challenges During the 1990s, the management of the hotel noticed that the costs of electricity for air conditioning were growing due to increasingly high summer temperatures (up to 40°C) and rising electricity costs. Conse- quently, the hotel owner, Mr. Letzakis, decided to invest in a thermally driven air conditioning system in the framework of the National Operational Programme for Energy of the Greek Ministry of Development, which provided subsidies of up to 50% of the capital investment costs of renewable energy projects.

RET installed A closed-loop chilled water system with an absorption chiller was installed, providing air conditioning services and hot water. The thermal chiller has a capacity of 105 kW and provides cooling to an area of 3,000 m2. In wintertime, the system is used to provide space heating. The thermal energy is provided by 450m2 of solar thermal collectors installed on the roof of the buildings. The system also comprises seven tanks for hot water storage, each of 7 m3 of volume. Moreover, a 290 kW gas boiler is used as an auxiliary heating support. The electricity needed to pump the LiBr solution is 0.5 kW, and the pump for the water circulation has a capacity of 1.5 kW. The average COP was 0.52 during its first year of operation.

Investment and financing ●● Capital investment: USD 146,000 ●● Policy support: 50% subsidy on the capital cost of the project, provided by the National Operational Pro- gramme for Energy of the Greek Ministry of Development

Economic benefits ●● Payback period: five years ●● Energy savings: electricity savings for cooling: 70,000 kWh per year; diesel oil saved for heating: 20,000 litres per year

Other benefits

●● Carbon emissions avoided: 100 tCO2 annually Lessons learned ●● Thermal cooling systems can fulfill customers’ air-conditioning needs even in non-tropical islands, with relatively short payback periods. ●● SAC systems can be used for space-heating purposes in wintertime, maximizing efficiency and improving economic returns.

50 Renewable Energy Opportunities for Island Tourism 6 CONCLUSIONS

This report shows that renewable energy technologies Third, the technical and human capacity necessary to (RETs) represent an economically attractive option for design effective energy policies, as well as to install and the island tourism sector. The cost of air conditioning manage RETs in tourism facilities, is still limited in many and water heating from RETs is considerably lower SIDS. Awareness-raising campaigns, as well as training than using electricity generated from diesel for the programs for institutional and technical capacity, would same service, while solar PV can generate electricity allow all actors, from policy to purchase and installa- more cheaply than utility tariffs or self-generation from tion, to familiarise themselves with the benefits of using diesel in most islands. Evidence from case studies and RETs. the analysis developed in this report show that a strong business case exists for hotels and tourism facilities in Several policy interventions have been successfully im- islands to invest in renewable energy. plemented in islands, and this report analyzes some of the best practices that have been applied with good re- Barriers limiting the deployment of renewable energy sults: (1) net metering policies and variable-accelerated in island tourism facilities remain to be addressed, for depreciation, to address the competitiveness of RET widespread deployment to take place. options; (2) leasing schemes and low-interest loans for the purchase of RETs, to provide a solution to access to First, renewable energy options are not always per- capital and the cost of financing; (3) Power Purchase ceived to be competitive with diesel-based power gen- Agreements, to tackle technical capacity gaps, access to eration. The main barriers include the requirement for capital and cost of financing; and (4) awareness raising capital to make an upfront investment (as opposed and training programs, to fill institutional and technical to paying for the use of a monthly electricity or fuel capacity gaps. bill), the perception of lower reliability of supply and a potentially challenging integration with the existing Many stakeholders stand to gain from the deployment electricity grid. Solutions exist, such as the design and of RETs: the private sector, as their electricity bills implementation of leasing schemes that would limit would decline (tourism sector) or their revenues would the requirement of upfront capital, or the enactment increase (suppliers and utilities); governments, because of incentives and disincentives (such as net meter- RETs create employment and improve trade balances ing, variable-accelerated depreciation, power purchase and environmental quality; and development partners, agreements and tax credits and rebates). because RETs reduce the environmental footprint of the tourism sector and strengthen the economies of Second, hotel owners and other tourism operators SIDS. In order to realise the multiple benefits of RETs, in islands generally have limited access to affordable coordinated action is required at all levels, using a col- financing and credit lines for the purchase and instal- laborative and multi-stakeholder approach. lation of small-scale renewable energy projects. This is also exacerbated by the principal-agent problem, This report constitutes the starting point for discussion where the ownership and management of facilities on the subject of accelerating the deployment of RETs are disjointed, reflected by a separation between who in island tourism. More RETs can be analyzed, which can could invest in RETs and who pays O&M costs (including prove to be competitive in specific island contexts (i.e., electricity bills). Preferential and low-interest loans, as technologies using wind, hydro, geothermal, biomass well as feed-in tariffs, would help overcome this barrier, and ocean for electricity). Island tourism consumes together with public targets (e.g., renewable energy energy not only in the accommodation sector, but also standards). To address the principal-agent problem, most prominently in the transport sector. Although leasing schemes or “captive power purchase agree- sometimes not cost-effective yet, options for replacing ments” can convert the need for a capital investment oil products with renewable energy in island transport into an operational cost and provide immediate savings. are already available today: biofuels for air transport;

Renewable Energy Opportunities for Island Tourism 51 biofuels and electric vehicles charged using renewable to provide up-to-date, authoritative and comprehensive energy for road transport; and wind, solar and biofuels information to its member countries and to the general for sea transport. IRENA is exploring all of these options public. from the technology, policy and costing perspectives,

52 Renewable Energy Opportunities for Island Tourism ANNEX I: TECHNOLOGY DETAILS

Solar water heating (SWH) systems Active and passive systems SWH technologies use the radiant energy from the sun Active systems use a pump plus controller to circulate to heat water. The main components of SWH systems a typically freeze-resistant heat fluid between collec- are the solar collector and the balance of system, which tor and storage when solar energy is available, and are includes the collector-storage loop, storage tank, heat dominant in hard-freeze climates. Two active system exchanger(s), pump(s), auxiliary devices, and/or con- schematics are shown in Figure A1. Most active systems trollers. The collector is the key component of the SWH are indirect, as in Figure A1 (b), with a heat exchanger as it converts the sun’s radiant energy to heat. The bal- between the non-potable heat transfer fluid and the ance of system and installation both generally cost more potable water storage. In non-freezing climates, the than the collector. active system will likely circulate potable water to the collectors, with no heat exchanger, as in Figure A1 (a). There are many collector technologies, with different efficiency levels and adaptability to diverse climatic Passive systems use no pumps or controls to move conditions. In the case of island tourism, two main types heated fluids between collector and storage and include of collectors are considered: flat plate and evacuated thermosiphon and integral-collector-storage. Thermosi- tubes. A flat plate collector is composed of a glass or phons are the most popular passive system worldwide, plastic cover (called glazing) on top and an absorber with natural convection moving hot water from the col- plate that is usually a sheet of high-thermal-conductivi- lector to the storage tank above, and cold water flowing ty metal with tubes or ducts either integral or attached. from tank bottom down to the collector inlet. Passive The collector is usually insulated to minimise heat loss. systems are dominant in warm climates because they Evacuated tube collectors are composed of several are less expensive and perform about the same as active glass or metal tubes containing water or heat transfer systems. However, they are currently not employed in fluid, surrounded by larger glass tubes. A vacuum space cold climates due to issues with freeze damage. is left between the tubes in order to minimise heat losses. Direct and indirect systems

Evacuated tube collectors can cost twice as much per Direct systems have no collector loop heat exchanger KW as flat plate collectors (about USD 300/kW and and use potable water directly in the collector loop, as USD 150/kW, respectively). Evacuated tube collectors in Figure A1 (a) and both systems in Figure A2. Direct are adequately efficient in cold climates, but they are systems are not suitable for cold climates, as they are less cost-efficient in warm climates, where the energy subject to freeze damage. On the other hand, they are needed for heating water is lower. In general, both flat the most used SWH systems in warm climates, due to plates and evacuated tubes provide useful energy at their lower cost. SWH operating temperatures, which range from 0oC to 60oC. In an island context with solar radiation of 1,700 Indirect systems use a heat exchanger between the kWh/m2, a 200-litre SWH system with flat plate solar collector loop and the storage to separate the collector collectors would probably be the most cost-effective loop fluid (usually a freeze-resistant fluid like glycol) solution to provide hot water to a hotel room. In particu- from potable water in the tank, as in Figure A1 (b). lar, the system would have a capacity factor of 16%, and Indirect systems are generally freeze-resistant and are a total capital cost of between USD 350 and USD 1,000. dominant in cold climates. As a result, most solar water heaters in cold climates are active/indirect systems, There are two main SWH classifications: active versus while most solar water heaters in warm climates are passive systems and direct versus indirect systems. passive/direct systems.

Renewable Energy Opportunities for Island Tourism 53 Figure A1. Schematic active SWH, showing pumps and controllers to transfer heat from collector to storage: (a) direct system (no heat exchangers); (b) indirect system with two heat exchangers. (a)

mixing valve

collector hot out

solar aux controller preheat tank tank

cold in pump

(b) mixing valve collector hot out heat exchanger

solar aux controller preheat tank tank

cold in pump pump

Source: Technical Resources for Implementing Energy Independence and Security Act of 2007 (EISA 2007 Section 532), Walker et al., DOE/ GO-102011-3354

Figure A2. Schematic passive system, with no pumps/controllers to circulate heat. Top: integral collector storage system. Bottom: thermosiphon system

mixing valve integral collector hot out storage

aux tank

cold in

thermosyphon mixing valve collector hot out

aux tank

cold in

54 Renewable Energy Opportunities for Island Tourism Solar air conditioning (SAC) systems ●● Single-effect absorption chillers: the fluids are transferred through the system using low-pres- SAC systems use solar thermal energy to power chillers sure steam or hot water as the heat source. and provide cooling to buildings. They are composed These systems are widely used and tested, and of solar collectors, storage tank, control unit, pipes and available in capacities from 7.5 to 1,500 tons. Wa- pumps and a thermally driven cooling machine. Like ter temperature required is usually above 80°C, SWH, SAC systems can use flat plates or evacuated and COP ranges from 0.6 to 0.8. This is similar tubes as solar collectors. For higher-efficiency chillers, to adsorption machines, with a higher minimum CST technologies can be adopted (Kalkan, Young, & temperature requirement but slightly higher ef- Celiktas, 2012). ficiency. Minimum size tends to be larger compared to adsorption chillers. However, smaller Four variants of CST technologies can be used (IEA- units have been recently developed. ETSAP & IRENA, 2013b): ●● Double-effect absorption chillers: these chillers can use concentrating solar thermal technologies ●● Parabolic Trough. This is the most common CSP or evacuated tube systems, and are composed of technology and uses parabolic mirrors to con- two condensers and two generators to allow for centrate solar radiation on heat receivers. PT sys- more refrigerant boil-off from the absorbent so- tems are up to 100 metres long, with a capacity lution. A higher performance is obtained by utilis- ranging between 14 and 80 MW-electric, efficien- ing the first heat input into the high-temperature cies of around 14-16%, and maximum operating generator effectively in two steps, gradually from temperatures of 390°C. high temperature level to low temperature level ●● Fresnel Reflectors. They are similar to parabolic (Yabase & Makita, 2012). These systems are more troughs, but they use a series of curved mirrors thermally efficient than the single-effect chillers, placed at different angles to concentrate the heat but they have a higher cost. Driving temperature onto a fixed receiver located above the mirror is usually at least 140°C, but the COP is usually field. above 1, and up to 1.2. ●● Solar Towers. They are composed of several com- ●● Triple-effect absorption chillers: they use three puter-controlled mirrors that track the sun indi- condensers and three generators, or two con- vidually and concentrate the heat onto a receiver. densers and two absorbers, in order to maximise They can use water steam, synthetic oil, molten thermal efficiency. As with the second-effect salt or natural gas as the primary heat transfer chillers, they can be driven by concentrating solar fluid. Their maximum operating temperatures thermal systems or evacuated tubes. In this case, can range between 250°C (water-steam) and COP can reach up to 1.9, with optimal driving above 800°C (using gases). temperature of 250°C. ●● Solar Dishes. They consist of a parabolic dish- shaped concentrator that reflects sunlight into Double- and triple-effect absorption chillers require a a receiver placed at the focal point of the dish. high temperature heat source steam, which can be sup- They are highly efficient and do not need cooling plied by CST technologies. systems for the exhaust heat. This makes them particularly suitable for water-constrained areas. Sea water air conditioning (SWAC) Unlike flat plate and evacuated tube collectors, which systems can use both direct and diffuse solar radiation, CST technologies only use direct radiation, which makes The main components of a basic SWAC system are the them suitable only for locations with particularly low seawater supply system, the heat exchanger or cooling frequency of cloudy weather. station, and the fresh water distribution system. The technical specificities of each component will largely Absorption chillers can be classified in terms of the depend on the size of the project and the distance of number or “effects”, with increasing efficiency and in- buildings from the sea. For this reason, the technical creasing hot water temperature requirements: conception of SWAC systems is the most delicate phase,

Renewable Energy Opportunities for Island Tourism 55 which involves a detailed analysis of the temperatures buildings with the same temperatures and flows used in and water quantities that will run through the system. a conventional air conditioning system. More specifically, detailed knowledge is required of (1) the water source (i.e., temperatures, depths, currents); The heat exchanger allows the cold seawater to cool (2) air conditioning requirements (i.e., number of build- the re-circulating fresh chill-water loop used for air ings, intensity of cooling effort throughout the year); conditioning application. In a typical SWAC system, the and (3) pipeline requirements (i.e., diameter, length cold seawater is pumped at 5°C, arrives at 6-7°C in the and consequent temperature losses during seawater heat exchanger, goes through the heat exchanger, and transfer). leaves at 12- 13°C. The fresh water of the air conditioning system does the exact opposite, arriving at 12°C and The seawater supply system is composed of seawater leaving at 7°C. Titanium heat exchangers are commonly intake and outtake pipelines, and a pump that is used used, since they combine resistance to salty water with to transfer water from deep sea to the heat exchanger high thermal conductivity. Once the seawater passes or cooling station. The intake pipeline brings water from through the heat exchanger, it is returned to the ocean deep seawater into the heat exchanger, and the outtake through another pipeline. pipelines transfer the seawater back to the sea (usually at higher depths in order to avoid negative ecosystem Importantly, SWAC is not technically complex; neither impacts from the discharge of heated water). Intake does it involve a high technical risk. Rather, it is an depths vary depending on specific projects: for exam- established technology being applied in an innovative ple, in the SWAC system of Intercontinental Bora Bora way. All the components necessary exist and have been Resort and Thalasso Spa, pipelines have a diameter operated under the conditions required. of 400mm and extract water from 900m of depth. On the other hand, the system of the Natural Energy Solar photovoltaic (PV) systems Laboratory of Hawaii has an intake depth of 650m, and pipelines with diameter ranging between 300mm and A solar PV system uses solar cells to convert solar en- 1 metre. Pipelines are the most critical components of ergy into DC electricity. A PV module consists of several a SWAC system, and the most expensive technology. solar cells assembled and electrically interconnected. They are made out of seawater-resistant material, such Depending on the size of the system, PV modules con as 13 polyethylene, and adequate filters are required be connected in a series and/or in parallel to increase to prevent accumulation of solid particles in the sys- voltage and/or current, respectively (IEA-ETSAP & tem. The pump is the only electrical component of a IRENA, 2013a). In addition to modules, solar PV requires SWAC system, and it has a capacity proportioned to the balance of system, which comprises an inverter, the distance of the buildings from the sea, as well as to racking, power control, cabling and batteries (if need- the overall size of the SWAC system. In the case of the ed). The inverter converts DC into AC, thereby allowing Intercontinental Bora Bora Resort and Thalasso Spa, a the connection to the grid and the use of solar PV with 15 kW pump is used, compared to a capacity of 300kW most electrical appliances. Batteries might be needed that would be needed for cooling hotel rooms through for off-grid systems to store PV-produced electricity conventional chilling systems. and release it when the sun is not shining (i.e., at night or during cloud cover). Depending on the size of the The fresh water distribution system is used to provide air system, solar exposure, and overall climatic conditions, conditioning to buildings, through a closed-loop chilling solar PV systems can be mounted on existing roofs or system. The freshwater circulating through the system dedicated structures on nearby open land or integrated is chilled using cold deep seawater, but it is never mixed directly into new construction. with seawater in order to avoid corrosion, siltation and contamination. The fresh water loop extracts heat from The balance of system consists of mature technologies the building and dumps it into the heat exchanger. This and components, whose prices have been steadily de- lowers the fresh water temperature before it is returned clining. Inverters are available with different capacities, to the building cooling system. The seawater loop typi- reaching up to 2 MW for use in large-scale systems. cally flows countercurrent to the fresh chill-water loop Either single or numerous inverters can be used for a from the buildings. Chilled fresh water moves through single PV system. Regarding electricity storage, the

56 Renewable Energy Opportunities for Island Tourism most common technologies are lead-acid batteries and prototypes, and up to 12% for commercial mod- pumped hydro storage systems (suitable for large-scale ules. However, they have higher manufacturing only). New types of storage technologies are being costs than the other TF modules. developed (e.g., new batteries, electric capacitors, com- Standard TF modules have a typical 60-120 Wp capacity pressed air systems, superconducting magnets and fly- and a size between 0.6-1.0 m2 for CIGS and CdTe, and wheels) with the aim to improve the cost-effectiveness 1.4-5.7 m2 for silicon-based TF. Overall, TF modules have of off-grid solar PV systems. an efficiency ranging between 4 and 12%, much lower ●● A variety of PV technologies are either commer- than c-Si modules. However, they have lower produc- cially available or under development. A descrip- tion cost, and shorter payback time than c-Si. Moreover, tion of some of them follows. plastic TF are usually frameless and flexible and can easily adapt to different surfaces. In recent years, TF technology has lost market share due to decreasing Wafer-based crystalline silicon (c-Si) costs of c-Si modules. State-of-the-art TF modules can In c-Si technology, silicon is used in three forms: mono reach 14% efficiency, with record modules at 17% and crystalline silicon (mono-c-Si), multi-crystalline silicon record cells at more than 20%. (multi-c-Si) and ribbon-sheet grown silicon. Multi-c-Si cells have lower efficiency than mono-c-Si cells, but they are Emerging and new PV technologies less expensive. A standard c-Si module is typically made up of 60-72 cells, has a nominal power of 120-300 Wp A variety of innovative PV technologies are being de- and a surface of 1.4-1.7 m2 (up to 2.5 m2 maximum). The veloped and tested in order to assess their potential cost of c-Si technology has decreased considerably over to increase current efficiency levels, at the same time the last years, especially due to improvements in produc- reducing costs and payback periods. The most impor- tion processes, which have enabled the amount of silicon tant include: required to be reduced. The target is to further cut prices 1) Concentrating PV (CPV): this is the most mature by reducing silicon from 5-10 g/Wp in 2013 to 3 g/Wp or of the new technologies, and it uses optical sun- less by 2050. The maximum theoretical efficiency for c-Si tracking concentrators (i.e., lenses, reflection and is currently estimated at around 29%. However, the major- refraction systems) to focus the direct sunlight ity of commercial mono-c-Si modules have an efficiency on highly efficient solar cells (c-Si modules with of between 13 and 19%, and multi-c-Si have an efficiency efficiency of 20-25%, or III-V semi-conductors ranging between 12 and 17 %. and multi-junction solar cells). 2) Organic solar cells: they are made of low-cost organic layers, but they have low efficiency (cur- Thin-films (TF) rently 4% for commercial applications). They The TF technology consists of the deposition of a thin include hybrid dye-sensitised solar cells (DSSC) layer of active materials on large-area substrates of ma- and fully-organic cells (OPV). Their feasibility and terials such as steel, glass or plastic. There are four main cost-effectiveness have yet to be proved. variants of TF technology: 3) Advanced inorganic thin-films: examples include 1) Amorphous silicon (a-Si) films are deposited on the spheral CIS approach (i.e., glass beads cov- very large substrates (5-6 m2), have low manu- ered by a thin multi-crystalline layer with a spe- facturing costs but also low efficiency (4-8%). cial interconnection between spheral cells) and 2) Amorphous and micromorph silicon multi-junc- multicrystalline silicon thin films obtained from tions (a-Si/_c-Si) films absorb more light in red high-temperature deposition process. and near-infrared spectrum, and may reach an 4) PV concepts relying on nanotechnology and efficiency up to 11%. quantum effects to provide high-efficiency solar 3) Cadmium-Telluride (CdTe) films are chemically cells: the objective for nanotechnology PV con- stable and offer relatively high module efficien- cepts is to reach cell efficiency higher than 25% cies (up to 11%). by 2015. On the other hand, quantum effects aim 4) Copper-indium-[gallium]-[di]selenide-[di]sul- to increase efficiency of existing technologies phide (CI[G]S) films have the highest efficiency (TF or c-Si) by 10% through photon absorption among TF technology, reaching up to 14% for and re-emission to increase energy capture.

Renewable Energy Opportunities for Island Tourism 57 ANNEX II: REVIEW OF RENEWABLE ENERGY POLICIES IN SIDS

Country RE Policy/Strategy RE Target RE Incentives/Regulatory Instruments 2026: 20% ●● Income Tax Relief Sustainable Energy Barbados of national ●● Import-Tax Exemptions on RET Framework for Barbados consumption ●● Autonomous generation allowed Comoros Renewable No specific Comoros ●● Capital subsidy, grant or rebates Energy Policy (2008) target Renewable Energy Chart 2015: 50% Cook Islands (2011) and Implementation ●● Net metering 2020: 100% Plan (2012)

2015: 60-70% ●● Autonomous generation allowed Energy Development of installed ●● No tax on imported equipment and Dominica Program (2009) capacity components 2020: 100% ●● Injection by IPPs 2020: 30% Federated States Energy Policy 2010 on energy ●● Net metering of Micronesia production ●● Grant and rebates for RETs Fiji’s National Energy Policy Fiji 2015: 90% ●● Tax incentives (2006) ●● Obligation and mandates National Energy Policy of ●● Autonomous generation allowed Grenada: A Low Carbon (net metering) Grenada Development Strategy for ●● Tax exemption for hotels importing Grenada, Carriacou and equipment and components Petite Martinique (2011) ●● Injection by IPPs Kiribati National Energy Being Kiribati Policy (2009) approved Republic of the National Energy Policy and 2020: 20% Marshall Islands Energy Action Plan (2009) ●● No customs duty applicable on equipment Long-Term Energy Strategy for renewable energy 2009-2025 ●● Minimum energy performance prepared and Mauritius 2025: 35% Energy Strategy 2011-2025 enforced for electric appliances, including Action Plan water heaters, refrigerators, ovens, dish- washers, washing machines, air conditioners Nauru Energy Framework 2020: 50% Nauru (2009); Nauru Energy of electricity Roadmap (2014) generation Niue Energy Policy and Niue 2020: 100% Action Plan (2005)

58 Renewable Energy Opportunities for Island Tourism Country RE Policy/Strategy RE Target RE Incentives/Regulatory Instruments ●● Subsidies and preferential loans (and equity Palau National Energy Palau 2020: 20% for commercial projects) for RETs for house- Policy (2010) holds and businesses Samoa Energy Sector Plan Samoa 2016: +10% 2012-2016

Second National Energy 2020: 5% ●● Incentives to grid-connected PV power Seychelles Policy (2010) 2030: 15% systems National Energy Policy ●● Incentives to financial institutions to finance Solomon Islands 2015: 50% Framework (2007) equipment purchase ●● Autonomous generation allowed (only off- grid) National Energy Policy ●● Income tax relief St. Lucia (2010) ●● Import tax exemption ●● Incentives to investors in energy-efficient tourism facilities National Energy Policy Saint Vincent and 2015: 30% ●● Renewable energy incentives granted on a (2009) Grenadines 2020: 60% case-by-case basis Energy Action Plan (2010) Tokelau National Energy 2012: 100% ●● Solar PV incentives Tokelau Policy and Strategic Action (reached) ●● Biofuels (coconuts) incentives Plan (2004) Tonga Energy Roadmap Tonga 2020: 50% ●● Financing of solar home systems 2010-2020 Enetise Tutumau ●● Financial incentives to grid-connected solar Tuvalu 2020: 100% 2012-2020 PV deployment Vanuatu Energy Roadmap Vanuatu 2020: 65% (2012)

Renewable Energy Opportunities for Island Tourism 59 REFERENCES

ADB. (2009). Taking Control of Oil. Managing Approach for Overcoming Barriers to Renewable Energy Dependence on Petroleum Fuels in the Pacific. Manila: Deployment. Center for Clean Air Policy. ADB. Deloitte. (2012). Mauritius Budget 2013. Facing a world AfDB. (2014, 01 08). SEFA to support innovative energy in transition. efficiency project in Mauritius. Retrieved from http:// European Commission. (2014). Energy prices and costs www.afdb.org/en/news-and-events/article/sefa-to- report. support-innovative-energy-efficiency-project-in- mauritius-12739/ GoM. (2009). Republic of Mauritius. Long-Term Energy Strategy. Ministry of Renewable Energy & Public Utilities. AOSIS. (2012). Barbados Declaration on Achieving Sustainable Energy for All in Small Island Developing Hampton, M. P., & Jeyacheya, J. (2013). Tourism and States (SIDS). Conference on “Achieving Sustainable Inclusive Growth in Small Island Developing States. The Energy for All in SIDS – Challenges, Opportunities, Commonwealth Secretariat. Commitments”. Bridgetown. Hotel Energy Solutions. (2011). Analysis on Energy Use Bassi, A., Deenapanray, P., & Davidsen, P. (2013). by European Hotels: Online Survey and Desk Research. Energy policy planning for climate-resilient low carbon Hotel Energy Solutions project publications. development. In H. Qudrat-Ullah. Energy Policy Modeling Hotel Energy Solutions. (2011a). Key Renewable Energy in the 21st Century. Springer. (RE) Solutions for SME Hotels. Hotel Energy Solutions Beccali, M., La Gennusa, M., Lo Coco, L., & Rizzo, G. (2009). Project Publications. An empirical approach for ranking environmental and Hotel Energy Solutions. (2011b). Factors and Initiatives energy saving measures in the hotel sector. Renewable Affecting Renewable Energy Use in the Hotel Industry. Energy, 34 (1), 82-90. Hotel Energy Solutions Project Publications. BNEF. (2013). Global Trends in Renewable Energy Husbands, J. (2014). Hot Water Energy Saving in the Investment 2013. Frankfurt. Hospitality Sector.

Broeze, J., & ven der Sluis, S. (2009). Factsheet. Seawater IEA. (2012). Technology Roadmap. Solar Heating and Cooling. Wageningen: Wageningen University. Cooling.

CDKN. (2012). Seizing the sunshine: Barbados’ thriving IEA. (2011). Deploying Renewables 2011. Best and Future solar water heater industry. Policy Practice. OECD & IEA.

CHENACT. (2012). Caribbean Hotel Energy Efficiency IEA. (2007). Mind the Gap. Quantifying Principal-Agent Action Program, Energy Efficiency and Micro-Generation Problems in Energy Efficiency. in Caribbean Hotels. CHENACT. IEA-ETSAP & IRENA. (2013a). Solar Photovoltaics. Commonwealth Secretariat. (2012). Small States: Technology Brief. Economic Review and Basic Statistics. London. IEA-ETSAP & IRENA. (2013b). Concentrating Solar Contreras-Lisperguer, R., & de Cuba, K. (2008). The Power. Technology Brief. Potential Impact of Climate Change on the Energy IPCC . (2007). Climate Change 2007: Impacts, Ad- Sector in the Caribbean Region. Organization of aptation and Vulnerability. Contribution of Work- American States. ing Group II to the Fourth Assessment Report of the Dalin, P. (2012). SWAC Aruba. Capital Cooling. Intergovernmental Panel on Climate Change.

Davis, S., Houdashelt, M., & Helme, N. (2012). Case Study: IRENA. (Forthcoming 2014). Developing quality Mexico’s Renewable Energy Program. A Step-by-Step infrastructure for small scale renewable energy

60 Renewable Energy Opportunities for Island Tourism technologies: the case of solar water heaters and small Cooling for the Built Environment”, (pp. 669-675). wind turbines. Santorini.

IRENA. (2012a). IRENA Policy Brief: Policy Challenges Millennium Ecosystem Assessment. (2005). Ecosystems for Renewable Energy Deployment in Pacific Island and Human Well-Being: Opportunities and Challenges Countries and Territories. IRENA. for Business and Industry.

IRENA. (2012b). Renewable Energy Country Profiles. Mitchell, C., Sawin, J., Pokharel, G., Kammen, D., Caribbean. Wang, Z., Fifita, S., et al. (2011). Policy, Financing and Implementation. In O. Edenhofer, R. Pichs-Madruga, IRENA. (2012c). Malta Communiqué on Accelerating Y. Sokona, K. Seyboth, P. Matschoss, S. Kadner, et al., Renewable Energy Uptake for Islands. Renewables and IPCC Special Report on Renewable Energy Sources and Islands Global Summit. St Julian’s. Climate Change Mitigation (pp. 865-950). Cambridge IRENA. (2012d). Electricity Storage and Renewables for and New York: Cambridge University Press. Island Power. Neiva de Figueiredo, J., & Guillén, M. (2014). Green Power: IRENA. (2012e). Renewable Energy Technologies: Cost Perspectives on Sustainable Electricity Generation. Boca Analysis Series. Solar Photovoltaics. Raton: CRC Press.

IRENA. (2012f). Capacity Building Strategic Framework Pacific Islands Forum. (2013). Majuro Declaration for for IRENA (2012-2015). Climate Leadership. Majuro.

IRENA. (2013a). Pacific Lighthouses. Renewable Energy Perlack, B., & Hinds, W. (2008). Evaluation of renewable Roadmapping for Islands. IRENA. Energy incentives: The Barbados Solar Water Heating Experience. IRENA. (2013b). Workshop on Harmonised Technical Raisul Islam, M., Sumathy, K., & Ullah Khan, S. (2013). Guidelines for PV Systems in the Pacific Islands. Solar Water Heating Systems and Their Market Trends. IRENA. (2014a). REmap 2030. A Renewable Energy Renewable and Sustainable Energy Reviews, 17, 1-25. Roadmap. REN21. (2013). Renewables 2013 Global Status Report. IRENA. (2014b). Renewable Energy and Jobs, Annual Paris: REN21 Secretariat. Review 2014. Abu Dhabi: IRENA. REN21. (2012). Renewables 2012 Global Status Report. IRENA. (2014c). Renewable Energy Costing Database: Paris: REN21 Secretariat. http://www.irena.org/costing Saastamoinen, M. (2009). Samsø – renewable energy Jaffe, A., & Stavins, R. (1994). The Energy Efficiency Gap. island programme . Samsoe: Samsoe Energy Academy. What Does it Mean? Energy Policy , 22 (10), 804-810. Schwerin, A. (2010). Analysis of the Potential Solar Kalkan, N., Young, E., & Celiktas, A. (2012). Solar thermal Energy Market in the Caribbean. CARICOM & GTZ. air conditioning technology reducing the footprint Shirley, R., & Kammen, D. (2013). Renewable energy of solar thermal air conditioning. Renewable and sector development in the Caribbean: Current trends Sustainable Energy Reviews, 16 (8), 6352-6383. and lessons from history. Energy Policy , 57, 244-252.

Kost, C., Mayer, J., Thomsen, J., Hartmann, N., Senkpiel, Simpson, M., Scott, D., Harrison, M., Silver, N., O’ Keeffe, E., C., Philipps, S., et al. (2013). Levelized Cost of Electricity Harrison, S., et al. (2010). Quantification and Magnitude Renewable Energy Technologies. Freiburg: Fraunhofer of Losses and Damages Resulting from the Impacts Institut for Solar Energy Systems ISE. of Climate Change: Modelling the Transformational Impacts and Costs of Sea Level Rise in the Caribbean. Lewis Engineering Inc. (2004). Greenhouse Gas Barbados: UNDP. Emission Reduction in St. Lucia. Report on: Energy Audit Training Workshop and Training Audits. Sloan, P., Legrand, W., & Chen, J. (2013). Sustainability in the Hospitality Industry: Principles of Sustainable Mamounis, N., & Dimoudi, A. (2005). Solar cooling Operations. Oxon: Routledge. potential in tourist complexes in the North Aegean. International Conference “Passive and Low Energy Soneva Resorts. (2013). Sustainability Report 2012-2013.

Renewable Energy Opportunities for Island Tourism 61 SPC. (2011). Towards an energy secure Pacific. A UNESCAP. (2012). Buildings: Policy Recommendations Framework for Action on Energy Security in the Pacific. for the the Development of Eco-Efficient Infrastructure. United Nations Publications. Strachan, J., & Vigilance, C. (2011). Integrating Sustainable Development Into National Frameworks: UNWTO. (2014). Compendium of Tourism Statistics. Policy Approaches for Key Sectors in Small States. Data 2008-2012. UNWTO Publications. Commonwealth Secretariat. UNWTO. (2013). Tourism Highlights – 2013 Edition.

TEEB. (2009). The Economics of Ecosystems and UNWTO. (2012). Challenges and Opportunities for Biodiversity for National and International Policy Makers. Tourism Development in Small Island Developing States. Summary: Responding to the Value of Nature. Madrid: UNWTO.

Tsagarakis, K., Bounialetou, F., Gillas, K., Profylienou, M., UNWTO. (2008). Tourism Highlights – 2008 Edition. Pollaki, A., & Zografakis, N. (2011). Tourists’ attitudes for WEF. (2013). The Green Investment Report. Geneva: selecting accommodation with investments in renewable World Economic Forum. energy and energy saving systems. Renewable and WEF. (2009). Towards a Low Carbon Travel & Tourism Sustainable Energy Reviews (15), 1335-1342. Sector. Geneva: World Economic Forum and Booz & UNDESA. (2010). Trends in Sustainable Development. Company. Smal Islands Developing States. New York: United Woerpel, H. (2012). Cashing in on Solar Thermal Energy. Nations. Air Conditioning, Heating & Refrigeration News, 20-22. UNDP. (2009). Annual Report 2009 – UNDP Pacific WTTC. (2012). Benchmarking Travel & Tourism. Oxford Centre. Partners in achieving prosperity and stability in Economics. the Pacific. WWF, Horwarth HTL & HICAP. (2010). Towards the UNEP. (2011). Towards a Green Economy. Pathways to Business Case for Sustainable Hotels in Asia. Motivations Sustainable Development and Poverty Eradication. and Impacts of Sustainable Hotel Development in Asia. A Guideline on Smart, PRactical, and Cost-Effective UNEP & UNWTO. (2012). Tourism in the Green Economy Development and Operating Practices. – Background Report. Madrid: UNWTO. Yabase, H., & Makita, K. (2012). Steam Driven Triple UNEP, UNDESA and FAO. (2012). SIDS-Focused Green Effect Absorption Solar Cooling System. International Economy: An analysis of challenges and opportunities. Refrigeration and Air Conditioning Conference, (p. 1272)

62 Renewable Energy Opportunities for Island Tourism IRENA Headquarters CI Tower, Khalidiyah P.O. Box 236, Abu Dhabi United Arab Emirates

IRENA Innovation and Technology Centre Robert-Schuman-Platz 3 53175 Bonn Germany